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Copart Inc. David Mizell 11/30/2004. Recommendation. Recommendation: Hold We currently own 1,000 shares Bought at $7.82 per share on February 28, 2003 Current price of $22.44 per share Cost Basis is $7,820. The market value is $22,440. 187% increase. Company Overview.

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copart inc

Copart Inc.

David Mizell

11/30/2004

recommendation
Recommendation
  • Recommendation: Hold
  • We currently own 1,000 shares
  • Bought at $7.82 per share on February 28, 2003
  • Current price of $22.44 per share
  • Cost Basis is $7,820.
  • The market value is $22,440.
  • 187% increase
company overview
Company Overview
  • Founded in 1982, became public in 1994
  • Provides vehicle suppliers, primarily insurance companies, with a full range of services to process and sell salvage vehicles through auctions, principally to licensed dismantlers, rebuilders and used vehicle dealers.
  • Generates revenue from auction fees paid by vehicle suppliers and buyers as well as fees for services such as towing and storage.
  • Operates 105 facilities in the US and Canada
financial performance
Financial Performance
  • Total revenues were:

- $316,455,800 in 2002

- $347,423,100 in 2003

- $400,796,300 in 2004

  •  Basic net earnings per share:

- $0.63 in 2002

- $0.62 in 2003

- $0.87 in 2004

  • Market Cap is 2.02 Billion
  • P/E ratio is 25.94
copart s numbers
Copart’s Numbers
  • Market Cap is 2.02B
  • P/E (ttm) is 25.94
  • EPS (ttm) is .865
  • Revenue (ttm) is 400.80M
  • Operating Margin (ttm) is 31.13%
  • Profit Margin (ttm) is 19.76%
  • Beta is 1.357
financial analysis
Financial Analysis
  • P/E Approach
    • Returns a price of $22.25
  • DCF
    • Returns a price of $15.38
  • View Excel Spreadsheet
competitor comparison
Competitor Comparison
  • Copart Inc.
    • Market Cap:2.02B
    • Rev. Growth (ttm):15.40%
    • Revenue (ttm):400.80M
    • Net Income (ttm):79.22M
    • EPS (ttm):0.865
    • P/E (ttm):25.94
  • Insurance Auto Auction Inc.
    • Market Cap:256.25M
    • Rev. Growth (ttm):-10.50%
    • Revenue (ttm):235.14M
    • Net Income (ttm):10.61M
    • EPS (ttm):0.901
    • P/E (ttm):24.63
porter s five forces
Porter’s Five Forces
  • Threat of New Entrants: Low
  • Threat of Substitutes: Low
  • Bargaining Power of Buyers: High
    • In auction format, people pay only what they want and have many choices from which to pick. The buyers in essence set the price.
  • Industry Rivalry: Low
  • Bargaining Power of Suppliers: Low
macroeconomic review
Macroeconomic Review
  • Motor Vehicle Crash Statistics
    • 6,328,000 auto accidents in 2003, up 12,000 from 2002
    • Cost of auto accidents $231B in 2000
      • 26% of total cost is property damage ($60B)
        • 50% of those costs paid by insurance companies
  • Proliferation of Online Auction Systems
    • EBay, Autotrader, Priceline, etc.
company and business basics
Company and Business Basics
  • Copart’s Growth Strategy
    • Acquiring new auto auction salvage facilities in key locations
      • Bought 3 sites, opened 2 more in 2004
    • Pursuing national and regional vehicle supply agreements with insurance companies
    • Maximizing returns to suppliers and maximize product value to buyers
      • For suppliers, real-time access to sales data online
      • For buyers, implementing VB2 bidding at all facilities
company and business basics1
Company and Business Basics
  • Copart’s Growth Strategy (continued)
    • Increasing revenue and profitability at public auction facilities
      • Own 6 facilities just for public auto auctions
      • Set up some online car auctions
    • Exploring new VB2 applications outside the auto auction industry
company and business basics2
Company and Business Basics
  • Value-Added Services
    • Internet bidding, Internet proxy bidding and virtual sales powered by VB2
    • E-mail notifications to potential buyers of salvage vehicles that match desired characteristics
    • Ten-view digital imaging of each vehicle and the scanning of each vehicle’s title and other significant documents such as body shop invoices, all of which are available online
company and business basics3
Company and Business Basics
  • Value-Added Services (continued)
    • CoPartfinder- Internet-based used vehicle parts locator that provides vehicle dismantlers with resale opportunities for the salvage vehicles they purchase
    • Offsite sales that allow vehicle suppliers to sell any vehicle, boat, or heavy equipment from where it sits
company and business basics4
Company and Business Basics
  • VB2 (Virtual Bidding-2nd generation)
    • What is VB2?
      • VB2 is Copart’s online auto auction system
      • As of this year, all of Copart’s auctions have been converted from live on-site to online
    • Why is VB2 so important?
      • Increases returns to sellers by expanding the pool of bidders to any person in the world with access to the Internet
      • Increases buyer convenience by eliminating the need to travel to the physical location of the auction
company updates
Company Updates
  • Copart is expanding rapidly
    • They have added 24 auction yards since 2002.
  • Provide the most extensive vehicle services in the industry
  • VB2 online technology is now fully implemented, and it has greatly improved their business
  • Concerns
    • This was a very low-tech company that has suddenly gone high tech very quickly.
      • Buyer and Website Issues
summary
Summary
  • Recommendation: Hold 1,000 shares
  • I believe Copart will continue to lead their industry. They have a great niche, and I believe they will continue to take advantage of it. Also, they provide the best services in the industry, and their online auction system will yield great benefits for them moving forward.
  • Questions?