CPRT — Copart, Inc.

Q3 FY26 EPS of $0.43 beat consensus by ~5% and revenue of $1.24B came in slightly above expectations, but U.S. insurance unit volumes still fell 4.2% YoY and overall revenue growth was only +2.1%. Analyst positioning is split—roughly 11 buys, 9 holds, and 1 sell, with targets from $25 to $45—so the market is waiting for evidence that the U.S. salvage-volume cycle is turning rather than pricing in a clear recovery.

Revenue growth decelerated sharply from 12–14% YoY in early FY2025 to +5.2% (Jul-25), +0.7% (Oct-25), -3.6% (Jan-26), then +2.1% (Apr-26). That is primarily a cyclical U.S. insurance-volume trough, not margin deterioration: TTM operating margin is 36.6%, and the Apr-26 quarter's 37.5% operating margin is consistent with Apr-25's 37.3%. EPS has been choppy—$0.36 in Jan-26, $0.43 in Apr-26—but TTM EPS is still $1.62, and international revenue (+14.1% YoY) and ASPs (+4.6%) are providing partial offsets.

As of 2026-08-27, CPRT looks historically cheap: 20.2x TTM earnings and 6.5x sales versus 5-year averages of 32.8x and 10.8x, respectively. It is less obviously cheap on a forward basis—~19.6x consensus FY2027 EPS of $1.671, with PEG around 3.9—so the market is paying a quality/moat premium while near-term growth is only ~4%. Net-net, valuation is fair-to-slightly-attractive, but not a deep-value setup on forward earnings.

The stock has de-rated from a 32.8x average multiple to 20.2x while TTM EPS has stayed around $1.62, meaning the multiple, not earnings, has done most of the falling. Consensus forward EPS of $1.671 is only ~3% above TTM EPS, so the current price already discounts a prolonged volume slump. The bullish play is a volume inflection that re-rates the multiple back toward the $35–$40 consensus-target zone; the bearish risk is that forward estimates get cut if the slump extends, making even 20x look less defensible.

As of 2026-08-27, RSI was 61.2, with price 5.4% above the 20-day SMA, 10.3% above the 50-day SMA, but 5.6% below the 200-day SMA. That is a short-term bounce within a longer-term downtrend, not yet a clean trend reversal. For entry timing, I'd prefer a sustained close above the 200-day SMA (~$34.70) or a retest near the $26.81 52-week low before establishing a position.

• High auto insurance premiums are pushing consumers toward liability-only policies and higher deductibles, reducing comprehensive claim frequency and near-term salvage supply.
• Total loss frequency has ticked up to ~23.6%, roughly 5 points above historical baselines, because ADAS and repair costs make insurers more likely to total vehicles—a structural volume floor.
• Higher-for-longer interest rates pressure auto affordability and discretionary asset multiples, but Copart's zero long-term debt and large cash balance insulate it from financing stress.
• International expansion (14.1% YoY revenue growth) is partly offsetting U.S. insurance volume declines.
• Consumer retrenchment and used-vehicle affordability could keep salvage volumes depressed until real incomes and insurance affordability improve.

• Q4 FY2026 earnings on September 3, 2026—especially management commentary on early FY2027 U.S. volumes and total-loss frequency.
• Stabilization in U.S. auto insurance claim frequency or comprehensive coverage, which would end the current volume slump.
• Continued international and ASP growth (international +14.1%, ASPs +4.6% in Q3 FY26) offsetting domestic softness.
• Jay Adair's return to the CEO role could reset operational priorities and signal founder confidence in the cycle.

• U.S. insurance-sourced volumes keep declining if consumers continue dropping comprehensive coverage amid elevated premiums.
• Forward estimates already imply only ~3% EPS growth; a miss or guide-down would make the ~19.6x forward multiple harder to justify.
• Management transition/execution risk as Jay Adair reclaims the CEO title from Jeff Liaw.
• Competition or digital disintermediation in the salvage-auction ecosystem could pressure take rates over time.

Copart is a high-quality, debt-free cash generator with durable ~36% operating margins, but the growth engine is currently idling because of a U.S. insurance-cycle slump. At $32.76 and ~20x TTM earnings, the market has already repriced the stock from premium to fair; I would stay Neutral until the September quarter shows a meaningful volume inflection rather than chasing the near-term technical bounce.

Applied a justified P/E approach: consensus FY2027 EPS of $1.671 times a 22x multiple. The 22x is a meaningful discount to Copart's 5-year average P/E of 32.8x to respect single-digit near-term growth, but a premium to the current 20.2x TTM multiple to reflect 33.5% net margins, zero debt, and the durable salvage-auction network; this yields $36.76.