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CarMax (KMX) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research

CarMax (KMX) closed the most recent trading day at $79.53, moving -1.34% from the previous trading session. This change lagged the S&P 500's 0.32% loss on the day. Meanwhile, the Dow lost 0.47%, and the Nasdaq, a tech-heavy index, lost 0.34%.

Coming into today, shares of the used car dealership chain had lost 11.75% in the past month. In that same time, the Retail-Wholesale sector lost 4.39%, while the S&P 500 lost 4.64%.

KMX will be looking to display strength as it nears its next earnings release, which is expected to be September 24, 2019. The company is expected to report EPS of $1.33, up 7.26% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.07 billion, up 6.28% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $5.26 per share and revenue of $19.62 billion. These totals would mark changes of +9.81% and +7.96%, respectively, from last year.

Any recent changes to analyst estimates for KMX should also be noted by investors. These revisions typically reflect the latest short-term business trends, which can change frequently. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.09% lower within the past month. KMX is currently a Zacks Rank #3 (Hold).

In terms of valuation, KMX is currently trading at a Forward P/E ratio of 15.31. This represents a discount compared to its industry's average Forward P/E of 17.

Also, we should mention that KMX has a PEG ratio of 1.22. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. Automotive - Retail and Wholesale - Parts stocks are, on average, holding a PEG ratio of 1.43 based on yesterday's closing prices.

The Automotive - Retail and Wholesale - Parts industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 98, putting it in the top 39% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

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