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CarMax (KMX) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

CarMax (KMX) closed at $86.64 in the latest trading session, marking a +1.97% move from the prior day. This move outpaced the S&P 500's daily gain of 1.3%. At the same time, the Dow added 1.41%, and the tech-heavy Nasdaq gained 1.75%.

Coming into today, shares of the used car dealership chain had gained 2.53% in the past month. In that same time, the Retail-Wholesale sector gained 3.12%, while the S&P 500 gained 0.46%.

Wall Street will be looking for positivity from KMX as it approaches its next earnings report date. This is expected to be September 24, 2019. On that day, KMX is projected to report earnings of $1.33 per share, which would represent year-over-year growth of 7.26%. 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.

Investors should also note any recent changes to analyst estimates for KMX. These revisions help to show the ever-changing nature of near-term business trends. 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. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.12% lower. KMX currently has a Zacks Rank of #3 (Hold).

Looking at its valuation, KMX is holding a Forward P/E ratio of 16.16. For comparison, its industry has an average Forward P/E of 17.46, which means KMX is trading at a discount to the group.

It is also worth noting that KMX currently has a PEG ratio of 1.29. 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 1.47 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 68, which puts it in the top 27% 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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