CPRT — Copart, Inc.

The tape is doing the talking as of 2026-09-13: -11.2% over the prior week, -12.1% over six months, and a price 12.6% under the 200-day SMA, all following the 2026-09-10 Q4 FY2026 print where revenue rose 2.4% to $1.15B but EPS fell 14.6% to $0.35 and gross margin compressed roughly 350bps year-over-year while G&A jumped 16.6%. Full-year FY2026 revenue was essentially flat (+0.4% to $4.67B) and net income fell 4.4% to ~$1.48B. Sentiment is not uniformly negative — the ACV deal was greeted with a ~6% jump, 12 of 21 analysts rate the shares Buy, and the consensus target of $37.60 sits ~25% above the $29.95 price — but the marginal seller is clearly winning, and Barclays' Underweight with a $25 target captures the bear case that no re-rating happens until service revenue growth and margins stabilize.

The three-year quarterly arc is deceleration, not collapse. Revenue ran ~$1.02B/quarter in FY2024, lifted to a $1.24B peak in Q3 FY2026 (Apr-2026), then printed $1.15B in Q4 FY2026 — full-year growth went +9.7% (FY25 revenue ~$4.65B) to +0.4% (FY26 ~$4.67B). Operating margin has slipped steadily: ~37.1% FY2024 → ~36.5% FY2025 → ~35.4% FY2026, and the damage is concentrated in the newest quarter, where Q4 FY2026 operating margin was 32.0% vs. 36.7% a year earlier and gross margin fell to 41.8% from 45.3%. EPS tells the same story: $1.39 FY2024 → $1.60 FY2025 (+15.1%) → $1.55 FY2026 (-3.1%), with the FY2026 decline cushioned by $1.63B of buybacks. Cash generation is holding up better than earnings — TTM free cash flow of ~$1.27B is up ~3% year-over-year — which is why the accruals ratio sits at a benign -0.3% and this looks more like a margin/pricing normalization than an earnings-quality problem. The key unresolved question is whether Q4's cost step-up (facility operations, vehicle sales costs, G&A) is a one-quarter blip or the new run rate; Q1 FY2027 (est. 2026-11-19) is the arbiter.

Cheap versus its own history, fair-to-modestly-cheap on absolute forward earnings. As of 2026-09-13 the stock trades at 19.2x TTM EPS of $1.60 and ~18.3x the FY2027 consensus EPS of $1.64, against a 5-year average P/E of 29.1x — the widest discount to its own history in the data window. Price/sales of 5.94 also sits well below the 5-year average of 9.37. The PEG ratio of -6.18 is meaningless (it is negative because trailing growth is negative), so ignore it. What the discount is really pricing is a business that no longer grows: 35.4% operating margins, 31.8% net margin, 14.3% ROIC and a debt-to-equity of 0.01 are elite quality metrics, and ~$4.5B of cash plus held-to-maturity securities (~16% of the $27.7B market cap) is a real cushion — but 0.4% revenue growth does not deserve 29x. Roughly 18x forward for a 35%-margin, net-cash compounder with stalled growth is a defensible, mildly cheap price, not a bargain-bin one.

Copart has taken a double hit: the multiple compressed from ~29x to ~19x TTM while the earnings themselves went from +15% growth to -3%. That is why the stock sits at $29.95 versus a 52-week high of $48.77. The good news is that at 18.3x forward EPS of $1.64, the market is not pricing in a return to the FY2023–FY2025 growth rate — it is pricing in flat-to-low-single-digit growth plus the current margin structure. So the setup is asymmetric if Q1 FY2027 shows gross margin recovering above ~44% and G&A growth normalizing; the stock could re-rate toward the low-20s multiple without heroic assumptions. The risk is estimate direction: if FY2027 EPS gets revised from $1.64 toward $1.50 (the Q4 cost run-rate plus lost interest income on ~$1.9B of cash going out the door for ACV), then 18x becomes 20x on the revised number and the stock is not cheap at all. Watch the revision trend, not the level.

Broken, not yet washed out. As of 2026-09-13, RSI(14) was 39.4 — weak, but with room to run to a genuine oversold reading near 30 before a bounce is likely. Price was 8.1% below the 20-day SMA, 1.1% below the 50-day, and 12.6% below the 200-day, a classic post-earnings breakdown in an established downtrend. The 52-week low of $26.81 is only about 10% below the current $29.95, so downside to the prior floor is limited but real, and the 50-day being roughly flat against price (-1.08%) confirms the drop is recent and sharp rather than a long grind. Practical implication: this is catching a falling knife territory. A more disciplined entry would wait for either an RSI dip below 30 or a reclaim of the 50-day SMA on volume; buying into a 39 RSI after an 11% week is a bet on mean reversion, not a technical signal.

• Used-vehicle and salvage ASP normalization: insurance ASPs hit record territory earlier in the year, cushioning volume softness — if used-car values roll over, both the fee take-rate and vehicle sales revenue compress together, which is the mechanism behind the Q4 FY2026 margin miss.
• Interest rates and the cash cushion: Copart's earnings have been flattered for years by interest income on a large cash and held-to-maturity balance. Rate cuts, plus $1.63B of FY2026 buybacks (cash fell from $5.2B in Oct-2025 to $1.9B in Jul-2026) and ~$1.9B of cash going out for ACV, remove a meaningful passive earnings prop in FY2027.
• Insurance total-loss frequency and collision volume: supply into Copart's yards is a function of miles driven, accident frequency and repair-cost inflation relative to vehicle value; any normalization in total-loss frequency is a structural volume headwind that no pricing can offset.
• Competitive intensity in salvage: RB Global (RBA) is actively rebuilding share, and digital entrants are attacking the auction layer — this is the most plausible explanation for service revenue growth of only 1.4% in Q4 FY2026 despite a healthy ASP backdrop.
• M&A and integration cycle in wholesale auto: the ACV deal (announced 2026-09-10, ~$1.9B equity, $10.50/share cash) pushes Copart into dealer-to-dealer digital wholesale, a larger but lower-margin and more competitive pool than salvage auction, at the same moment the core business is digesting cost inflation.

• ACV acquisition close, expected by the end of calendar 2026 via an all-cash tender offer approved by both boards — regulatory clearance, tender acceptance and the first integration commentary will drive perception of whether this is value-creating diversification or a $1.9B distraction.
• Q1 FY2027 earnings, estimated for 2026-11-19 after the close — the first quantitative read on whether Q4 FY2026's gross margin (41.8%) and G&A (+16.6%) were a one-quarter anomaly or the new run rate, and whether ACV is dilutive to the FY2027 EPS base.
• Used-vehicle ASP durability into the fall — record insurance ASPs earlier in 2026 have cushioned flat volumes; any sustained pricing strength offsets the Q4 cost pressure, any rollover compounds it.
• Continued capital return: $1.63B of FY2026 buybacks at ~19x earnings is accretive, and ~$4.5B of cash and held-to-maturity securities (pre-ACV) leaves room for more.
• Analyst estimate and target resets post-ACV — the consensus target of $37.60 versus Barclays' $25 low shows unusually wide dispersion; a wave of upward or downward revisions will likely set the tone into the November print.

• The Q4 FY2026 margin hit proves structural rather than transient. Gross margin fell ~350bps YoY to 41.8% and G&A rose 16.6%; if facility operations and vehicle sales costs have permanently reset higher, the FY2027 EPS base is below the $1.64 consensus and the stock is more expensive than it looks.
• Competitive share loss at the core salvage auction business — service revenue growth of only 1.4% in Q4 with RB Global rebuilding share is the real thesis-breaker, because Copart's margins come from scale in a near-duopoly.
• ACV integration risk: $1.9B of cash for a dealer-to-dealer digital marketplace that has not been profitable, in a market adjacent to but culturally and operationally different from salvage; retention of ACV's dealer network and management, and the loss of interest income on the deployed cash, both bite FY2027 earnings.
• Growth stall persisting — FY2026 revenue of +0.4% and EPS of -3.1% mean the de-rating from a 29x to a 19x multiple is fundamentally justified, not merely sentiment-driven; there is no automatic snap-back.
• Multiple risk: even after the de-rating, 18x forward is not objectively cheap versus the broader market, so a general market de-rating or sector rotation out of Industrials would pressure the shares regardless of company-specific execution.
• Interest income erosion — cash and equivalents fell from $5.1B (Jan-2026) to $1.9B (Jul-2026) as buybacks consumed the balance; the ~$4.5B cash and held-to-maturity cushion that currently equals ~16% of market cap is being actively spent down.

Copart is a genuinely elite business — 35.4% operating margin, 31.8% net margin, 14.3% ROIC, debt-to-equity of 0.01, ~$1.27B of TTM free cash flow and net cash equal to roughly 16% of market cap — currently going through a real growth air pocket: FY2026 revenue +0.4%, EPS -3.1%, and a Q4 that missed on both EPS ($0.35 vs. $0.38) and margin. At $29.95 on 2026-09-13, the stock is at 19.2x trailing and ~18.3x forward, versus a 5-year average P/E of 29.1x, which is the cheapest it has looked in the data window and does discount a lot of bad news. But cheap-versus-its-own-history is not the same as cheap on absolute terms, and with technicals broken (RSI 39.4, 12.6% below the 200-day), the growth trend unresolved, and a $1.9B all-cash acquisition of a currently unprofitable business about to close and complicate comparability, there is no need to be early. I would want one clean quarter — Q1 FY2027 on 2026-11-19 showing gross margin back above ~44% and G&A normalizing — before treating this as a turnaround rather than a value trap.

Blend of two methods, both run on the data above: (1) 21x FY2027 consensus EPS of $1.64 = $34.44, a multiple deliberately set below the 5-year average P/E of 29.1x to reflect stalled growth but above the 18.3x forward the stock trades at on 2026-09-13, justified by 35% operating margins, 14.3% ROIC and a net-cash balance sheet; and (2) a simplified DCF on TTM free cash flow of $1.27B growing 6% for five years with a 3% terminal rate and an 8.5% WACC, yielding an enterprise value of ~$27.0B, plus ~$4.4B of net cash less ~$1.9B of cash consumed by the announced ACV purchase = ~$32/share. Averaging the two gives $33.50, about 12% above the 2026-09-13 price of $29.95 and below the $37.60 sell-side consensus.