Why Copart Is Down 20% This Year
Let’s get to the real reason you’re here. Copart stock—a high-quality compounder—is down over 20% year-to-date. Many investors see this as a golden opportunity to scoop up shares at a discount. But is it really a bargain? Or could it be a value trap?
There are three main reasons for the drop:
- The stock was trading at a premium valuation for a long time. When growth slows, the market punishes.
- Copart is facing cyclical headwinds. Volume and sales have missed estimates.
- Their biggest competitor, IAA, was recently acquired. Capital is flowing into IAA, intensifying the battle for market leadership.
This doesn’t mean Copart’s fundamentals are broken. It’s more of a valuation correction. The company was priced for perfection, and now the market is adjusting.
What Copart Actually Does
Quick refresher: Copart is a leader in online vehicle auctions and remarketing services. They specialize in reselling salvage vehicles—cars that are damaged or unwanted. Through their proprietary platform VB3, they connect sellers and buyers globally.
Even total-loss vehicles have value. Some buyers want to repair them, others want parts. Copart has scaled massively, with over 260,000 vehicles listed online daily and more than 3 million cars sold annually.
Copart’s Economic Moat
What makes Copart special is its economic moat. It’s wide—really wide. That moat comes from two things: scale and network effects.
Think of Instagram. The more users, the more valuable the platform. Same with Copart. More sellers attract more buyers. More buyers attract more sellers. It’s a self-reinforcing loop.
And then there’s the land strategy. Copart owns 90% of its 16,000 acres. IAA, by contrast, owns just 10% of its 12,000 acres. IAA leases land, which helped it expand faster but hurts long-term margins. Copart’s ownership model gives it pricing power and a barrier to entry that’s hard to beat.
Land Ownership Comparison
| Company |
Total Acres |
% Owned |
Expansion Model |
| Copart |
16,000 |
90% |
Ownership |
| IAA |
12,000 |
10% |
Leasing |
Financials: A Compounder in Action
Copart’s financials are beautiful. From 2016 to 2025, revenue and net income have grown every single year. Stable, consistent, predictable. That’s the definition of a compounder.
But there’s one metric that looks a bit off—return on capital employed (ROCE). Since 2022, it’s been declining. Does that mean Copart is getting worse at investing its capital?
Not exactly. ROCE is calculated as net income divided by total assets. Net income is growing, so the drop must be due to rising assets. And that’s exactly what’s happening. Copart is generating so much cash, they’re not sure where to invest it.
Financial Growth Snapshot
| Year |
Revenue Trend |
Net Income Trend |
ROCE Trend |
| 2016–2025 |
Consistent Growth |
Consistent Growth |
Declining Since 2022 |
Cash Pile and Capital Discipline
Since 2021, Copart’s cash reserves have ballooned. Historically, their cash-to-income ratio was modest. Now, they’re sitting on a mountain of cash. And management isn’t rushing to spend it.
They’ve addressed this directly. Their investment philosophy hasn’t changed—they’re just waiting for the right opportunities. That’s refreshing. Instead of chasing returns, they’re protecting investor capital.
So what’s next? Will they use the cash for geographic expansion? Share buybacks? A special dividend? We’ll have to wait and see.
Cash Management Overview
| Metric |
Pre-2021 |
Post-2021 |
| Cash-to-Income Ratio |
Low |
High |
| Capital Deployment |
Steady |
Cautious |
| ROCE Impact |
Neutral |
Declining |
Two Key Growth Catalysts
Let’s start with the upside. Copart has two major growth levers that are already in motion.
The first is the rising share of total loss claims. This refers to the percentage of vehicles involved in accidents that insurance companies deem unrepairable. Instead of covering repairs, insurers pay out a settlement and send the vehicle to Copart’s auction platform. This ratio has climbed from 16% to 21%—close to all-time highs.
And no, it’s not because people are crashing more. It’s because cars are more complex. Screens, sensors, Bluetooth, and EV batteries make repairs more expensive and less feasible. That complexity drives more total losses, which means more inventory for Copart.
The second growth driver is geographic expansion. Copart is aggressively acquiring and developing new storage facilities, especially in Europe. These markets are relatively untapped, and even when Copart enters, it’s often the largest player. That means plenty of addressable market left to capture.
Risks to Watch
Of course, no investment is without risk. Copart faces three main challenges:
Increased competition from IAA: Their biggest rival was recently acquired and is receiving significant capital investment. Copart must maintain its insurance contracts and platform dominance to stay ahead. It’s a familiar battleground, but one that requires steady execution.
Volume and sales misses: The auto industry is cyclical. While Copart is somewhat insulated, it’s not immune. Recent earnings misses reflect that. Management expects normalization by late 2026, but investors should be prepared for bumps.
Valuation metrics: This is the most measurable risk. Copart was trading at a free cash flow yield below 2%—too rich for a company no longer growing at double digits. Now, it’s approaching a 3% yield, a level not seen in years. Historically, buying at this yield has marked the bottom of price declines.
Historical Valuation Benchmarks
| Metric |
Historical Low |
Current Level |
Signal Strength |
| Free Cash Flow Yield |
~3% |
Nearing 3% |
Potential Bottom |
| Price-to-Earnings Ratio |
~25 |
~25 |
Historical Floor |
Discounted Cash Flow Scenarios
To get a clearer picture, I ran a simple DCF model with both bear and bull cases. These are not gospel—just directional estimates based on reasonable assumptions.
In the bear case, we assume:
- Revenue growth of 7% in year one, then 9% thereafter
- Margins stabilize at 35%
- Capex remains at 12% of revenue
- No meaningful share buybacks
In this scenario, expected annual returns range from 7% to 12%.
In the bull case, we assume:
- Revenue growth of 8% and then 10%
- Margins slightly higher than 35%
- Capex drops to 10%
- Share buybacks contribute a 0.3% yield annually
Here, expected returns jump to 12% to 17% annually.
DCF Return Estimates
| Scenario |
Revenue Growth |
Margin |
Capex % |
Buyback Yield |
Expected Return |
| Bear Case |
7–9% |
35% |
12% |
-0.2% |
7–12% annually |
| Bull Case |
8–10% |
35–37% |
10% |
+0.3% |
12–17% annually |
Compounder Score and Final Thoughts
Using our compounder scoring system, Copart earned a 16.5 out of 22. That’s solid—but not elite. Points were deducted for:
- Not being asset-light (capex consistently above 10% of revenue)
- Limited margin expansion potential
- Modest growth expectations (7.7% CAGR over the next 3 years)
This places Copart in the “high conviction” category, but not “best-in-class.” Personally, I’m holding off on investing right now. I’m reserving capital and research time for a company that scores 19 or higher.
That said, if Copart’s stock slips another 5–10%, I’ll be taking a closer look. The fundamentals are intact, and valuation is becoming attractive. It’s not a screaming buy—but it’s getting interesting.
Verdict: Buy, Hold, or Sell?
Based on current valuation, growth drivers, and competitive positioning, Copart is a hold. It’s a high-quality business facing cyclical headwinds and valuation compression. If the price drops further, it could become a compelling buy. But for now, patience is key.
https://youtu.be/6dy2t_XTz2M?si=qvBkYeHzPjZ74OsC
Why Copart Is Down 20% This Year
Let’s get to the real reason you’re here. Copart stock—a high-quality compounder—is down over 20% year-to-date. Many investors see this as a golden opportunity to scoop up shares at a discount. But is it really a bargain? Or could it be a value trap?
There are three main reasons for the drop:
This doesn’t mean Copart’s fundamentals are broken. It’s more of a valuation correction. The company was priced for perfection, and now the market is adjusting.
What Copart Actually Does
Quick refresher: Copart is a leader in online vehicle auctions and remarketing services. They specialize in reselling salvage vehicles—cars that are damaged or unwanted. Through their proprietary platform VB3, they connect sellers and buyers globally.
Even total-loss vehicles have value. Some buyers want to repair them, others want parts. Copart has scaled massively, with over 260,000 vehicles listed online daily and more than 3 million cars sold annually.
Copart’s Economic Moat
What makes Copart special is its economic moat. It’s wide—really wide. That moat comes from two things: scale and network effects.
Think of Instagram. The more users, the more valuable the platform. Same with Copart. More sellers attract more buyers. More buyers attract more sellers. It’s a self-reinforcing loop.
And then there’s the land strategy. Copart owns 90% of its 16,000 acres. IAA, by contrast, owns just 10% of its 12,000 acres. IAA leases land, which helped it expand faster but hurts long-term margins. Copart’s ownership model gives it pricing power and a barrier to entry that’s hard to beat.
Land Ownership Comparison
Financials: A Compounder in Action
Copart’s financials are beautiful. From 2016 to 2025, revenue and net income have grown every single year. Stable, consistent, predictable. That’s the definition of a compounder.
But there’s one metric that looks a bit off—return on capital employed (ROCE). Since 2022, it’s been declining. Does that mean Copart is getting worse at investing its capital?
Not exactly. ROCE is calculated as net income divided by total assets. Net income is growing, so the drop must be due to rising assets. And that’s exactly what’s happening. Copart is generating so much cash, they’re not sure where to invest it.
Financial Growth Snapshot
Cash Pile and Capital Discipline
Since 2021, Copart’s cash reserves have ballooned. Historically, their cash-to-income ratio was modest. Now, they’re sitting on a mountain of cash. And management isn’t rushing to spend it.
They’ve addressed this directly. Their investment philosophy hasn’t changed—they’re just waiting for the right opportunities. That’s refreshing. Instead of chasing returns, they’re protecting investor capital.
So what’s next? Will they use the cash for geographic expansion? Share buybacks? A special dividend? We’ll have to wait and see.
Cash Management Overview
Two Key Growth Catalysts
Let’s start with the upside. Copart has two major growth levers that are already in motion.
The first is the rising share of total loss claims. This refers to the percentage of vehicles involved in accidents that insurance companies deem unrepairable. Instead of covering repairs, insurers pay out a settlement and send the vehicle to Copart’s auction platform. This ratio has climbed from 16% to 21%—close to all-time highs.
And no, it’s not because people are crashing more. It’s because cars are more complex. Screens, sensors, Bluetooth, and EV batteries make repairs more expensive and less feasible. That complexity drives more total losses, which means more inventory for Copart.
The second growth driver is geographic expansion. Copart is aggressively acquiring and developing new storage facilities, especially in Europe. These markets are relatively untapped, and even when Copart enters, it’s often the largest player. That means plenty of addressable market left to capture.
Risks to Watch
Of course, no investment is without risk. Copart faces three main challenges:
Increased competition from IAA: Their biggest rival was recently acquired and is receiving significant capital investment. Copart must maintain its insurance contracts and platform dominance to stay ahead. It’s a familiar battleground, but one that requires steady execution.
Volume and sales misses: The auto industry is cyclical. While Copart is somewhat insulated, it’s not immune. Recent earnings misses reflect that. Management expects normalization by late 2026, but investors should be prepared for bumps.
Valuation metrics: This is the most measurable risk. Copart was trading at a free cash flow yield below 2%—too rich for a company no longer growing at double digits. Now, it’s approaching a 3% yield, a level not seen in years. Historically, buying at this yield has marked the bottom of price declines.
Historical Valuation Benchmarks
Discounted Cash Flow Scenarios
To get a clearer picture, I ran a simple DCF model with both bear and bull cases. These are not gospel—just directional estimates based on reasonable assumptions.
In the bear case, we assume:
In this scenario, expected annual returns range from 7% to 12%.
In the bull case, we assume:
Here, expected returns jump to 12% to 17% annually.
DCF Return Estimates
Compounder Score and Final Thoughts
Using our compounder scoring system, Copart earned a 16.5 out of 22. That’s solid—but not elite. Points were deducted for:
This places Copart in the “high conviction” category, but not “best-in-class.” Personally, I’m holding off on investing right now. I’m reserving capital and research time for a company that scores 19 or higher.
That said, if Copart’s stock slips another 5–10%, I’ll be taking a closer look. The fundamentals are intact, and valuation is becoming attractive. It’s not a screaming buy—but it’s getting interesting.
Verdict: Buy, Hold, or Sell?
Based on current valuation, growth drivers, and competitive positioning, Copart is a hold. It’s a high-quality business facing cyclical headwinds and valuation compression. If the price drops further, it could become a compelling buy. But for now, patience is key.
https://youtu.be/6dy2t_XTz2M?si=qvBkYeHzPjZ74OsC