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CarMax (KMX) Gains But Lags Market: What You Should Know

Zacks Equity Research

In the latest trading session, CarMax (KMX) closed at $94.98, marking a +0.22% move from the previous day. This change lagged the S&P 500's 0.56% gain on the day. At the same time, the Dow added 0.49%, and the tech-heavy Nasdaq gained 1.01%.

Coming into today, shares of the used car dealership chain had gained 9.71% in the past month. In that same time, the Retail-Wholesale sector gained 0.67%, while the S&P 500 gained 1.38%.

Wall Street will be looking for positivity from KMX as it approaches its next earnings report date. On that day, KMX is projected to report earnings of $1.14 per share, which would represent year-over-year growth of 4.59%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $4.62 billion, up 7.63% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.29 per share and revenue of $19.76 billion, which would represent changes of +10.44% and +8.73%, respectively, from the prior year.

Any recent changes to analyst estimates for KMX should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. 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. Over the past month, the Zacks Consensus EPS estimate has moved 0.24% higher. KMX is holding a Zacks Rank of #3 (Hold) right now.

Valuation is also important, so investors should note that KMX has a Forward P/E ratio of 17.93 right now. For comparison, its industry has an average Forward P/E of 19.37, which means KMX is trading at a discount to the group.

It is also worth noting that KMX currently has a PEG ratio of 1.43. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. KMX's industry had an average PEG ratio of 1.59 as of yesterday's close.

The Automotive - Retail and Wholesale - Parts industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 63, putting it in the top 25% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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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