Over the past years, I've been a bit negative about Carmax, qualifying that stock as a "fucking stock".
Well, it's not really a "fucking stock". It's a good stock. But it's volatile. So, it could be a stock you trade when it's expensive or cheap.
Everybody knows that Carmax sells mostly used cars. Their business model is simple: no harassment and cheap prices. And it worked well so far (continue reading).
The historical PE ratio of Carmax is about 20. Currently, the PE ratio of the stock is 14 and the forward PE is 12. In other words, that stock is very cheap right now.
The predictability of the stock is very high (close to 100% according to Value Line). These highly predictable stocks are very rarely cheap because predictability is a pricey characteristic. And according to analysts, annual EPS growth for the next 5 years should be around 13-14% while annual EPS growth has been 15% for the last 5 years.
Plus, that company is in a sector which is competitive but not associated with fads or technology (they sell used cars, so even if Tesla or other electric cars become more present, Carmax will sell these cars).
There's very few highly predictable stocks with such a nice growth. The Beta of that stock is a little high, but it's a very good company anyway. Many great investors own shares of KMX, and while it shouldn't be a reason to invest (many great investors have that prestigious name but don't have the qualities to deserve it), when you find the numbers you're looking for, a co-ownership with Chuck Akre or Giverny Capital isn't a bad thing.
Murray Keith (Odlum Brown-Read their newsletter and from time to time their model portfolio updates), Marc Lécuyer & Philippe Leblanc de Cote100 Will be your new coinvestors on top of Frank Rochon...
RépondreSupprimerThey are up to their eyeballs in debt. $14B in debt for a company that has a market cap of $10B. Unless my data source is incorrect I would strongly recommend having a look at their debt profile. With EBITDA of $1.33B that would scare the merde out of me. Maybe this business always runs with a lot of debt as they use debt to acquire the stuff they sell but there are lots of other companies of similar size and valuation that do not rely on this much debt to generate returns.
RépondreSupprimerYou fall in the same trap as I did Vicario. It’s not debt. It’s loans.
SupprimerThe stock is way more solid than it looks.
And a negative cash flow every year since 2021
RépondreSupprimer2011 instead of 2021
Supprimer