I liked your post, although just being a junk man, I don't get what you mean by a WMV of $35.00 within 12 months? One thing you might want to do is figure in the approximate savings to Copart once they don't have to lay out between 3 and 4 million in personnel costs they will save once the auctioneers and ring people are no longer in the picture. In addition, I would look for a MINIMUM of a 3% increase in revenues as smaller insurance companies leave the mud sales for better exposure to their salvage product. There are some units that don't belong at Copart. (See comments below). However, any insurance company that sends late model cars and imports to the mud sales simply are not getting maximum return on their salvage.
I see the industry evolving into three categories:
(1) Scrap cars, burn jobs etc. will be sold to local scrap dealers at the storage yard after the loss occurs. I can't believe the money the insurance copanies lose by having this category of unit towed 50 miles or so from point of loss. These cars are crush bait with zero recovery value.
(2) Cars that are very cheap i.e. $50 to $100 units will be sold by contract directly to the buyers for these units (scrap processors and "u pull it operators").
(3) Premium salvage units, 7 years and newer, all foreign cars etc. will be put into the international/premium market by firms like Copart and the others who can become technically competent.
This is my target price and is a function of projected earnings per share and growth rate. I use the last 12-16 quarters of revenue and eps data to forecast future revenues and eps. I use a statistical algorithm that seasonally adjusts and predicts.
I only seriously consider companies who have predictable (not always apparently stable) revenues, reporting net profits. In statistical lingo, if the R^2 on the regression is less than 0.95, I stop looking and move on to the next opportunity.
This process removes a lot of the emotion and speculation that makes objective decisions difficult.