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CarMax (KMX) Gains As Market Dips: What You Should Know

Zacks Equity Research

CarMax (KMX) closed at $94.15 in the latest trading session, marking a +0.29% move from the prior day. This change outpaced the S&P 500's 0.2% loss on the day. Elsewhere, the Dow gained 0.04%, while the tech-heavy Nasdaq lost 0.13%.

Heading into today, shares of the used car dealership chain had gained 7.4% over the past month, outpacing the Retail-Wholesale sector's gain of 6.5% and the S&P 500's gain of 7.08% in that time.

Investors will be hoping for strength from KMX as it approaches its next earnings release. 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.

Investors might also notice recent changes to analyst estimates for KMX. 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.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, 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 remained stagnant. KMX is currently a Zacks Rank #2 (Buy).

Digging into valuation, KMX currently has a Forward P/E ratio of 17.76. Its industry sports an average Forward P/E of 19.49, so we one might conclude that KMX is trading at a discount comparatively.

Investors should also note that KMX has a PEG ratio of 1.41 right now. 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. Automotive - Retail and Wholesale - Parts stocks are, on average, holding a PEG ratio of 1.6 based on yesterday's closing prices.

The Automotive - Retail and Wholesale - Parts industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 23, which puts it in the top 10% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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