Is Copart, Inc. (CPRT) A Good Stock to Buy?

Company Overview - Copart, Inc. provides online auctions and vehicle remarketing services both in the United States and internationally [2] - As of March 12th, Copart's share was trading at $33.97, with trailing and forward P/E ratios of 22.36 and 22.88 respectively [1] Recent Performance - Copart reported weaker Q2 2026 results, with global insurance units declining by 9% year-over-year, revenue falling by 3.6% to $1.12 billion, and earnings per share dropping by 9.2% to $0.36 [2] Market Conditions - The decline in performance reflects difficult comparisons and broader weakness in the insurance vehicle market, including policy shifts, reduced consumer insurance coverage, and changes in carrier mix [3] - Management believes these pressures are cyclical rather than structural [3] Industry Trends - The industry is influenced by two opposing forces: declining accident rates due to improving vehicle technology and rising total loss frequency, which has increased from 15.6% in 2015 to 24.2% in the latest quarter [4] - Management expects total loss frequency to reach 25-30% over time, supporting sustained demand for Copart's auction platform [4] Pricing Power and Competitive Advantage - Copart earns fees tied to vehicle sale prices, benefiting from stronger pricing, with U.S. insurance selling prices rising by 6% year-over-year in the quarter [5] - The company's deep buyer and seller network enhances pricing power and liquidity, reinforcing its competitive advantage, especially as it shifts towards the consignment model internationally [5] Long-term Outlook - Despite near-term unit declines, management maintains that the long-term thesis remains intact, demonstrating confidence through share repurchases of over 13 million shares for more than $500 million year-to-date [6] - With shares down approximately 43% from their all-time high and free cash flow reaching a record $1.4 billion, the stock trades at about 21x EV/FCF, indicating an attractive valuation for a high-quality business facing temporary cyclical headwinds [6]