U.S. markets closed
  • S&P 500

    3,465.39
    +11.90 (+0.34%)
     
  • Dow 30

    28,335.57
    -28.13 (-0.10%)
     
  • Nasdaq

    11,548.28
    +42.28 (+0.37%)
     
  • Russell 2000

    1,640.50
    +10.25 (+0.63%)
     
  • Crude Oil

    39.78
    -0.07 (-0.18%)
     
  • Gold

    1,903.40
    -1.80 (-0.09%)
     
  • Silver

    24.70
    +0.03 (+0.10%)
     
  • EUR/USD

    1.1860
    +0.0034 (+0.28%)
     
  • 10-Yr Bond

    0.8410
    -0.0070 (-0.83%)
     
  • GBP/USD

    1.3060
    -0.0020 (-0.16%)
     
  • USD/JPY

    104.6440
    -0.1960 (-0.19%)
     
  • BTC-USD

    13,028.65
    +11.12 (+0.09%)
     
  • CMC Crypto 200

    260.05
    -1.40 (-0.54%)
     
  • FTSE 100

    5,860.28
    +74.63 (+1.29%)
     
  • Nikkei 225

    23,516.59
    +42.29 (+0.18%)
     

With EPS Growth And More, Copart (NASDAQ:CPRT) Is Interesting

Simply Wall St

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like Copart (NASDAQ:CPRT), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Copart

Copart's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Copart has grown EPS by 21% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Copart's EBIT margins were flat over the last year, revenue grew by a solid 16% to US$2.1b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

NasdaqGS:CPRT Income Statement, January 14th 2020
NasdaqGS:CPRT Income Statement, January 14th 2020

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Copart EPS 100% free.

Are Copart Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$22b company like Copart. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$2.8b. That equates to 13% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations over US$8.0b, like Copart, the median CEO pay is around US$11m.

The Copart CEO received total compensation of just US$156k in the year to July 2019. That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is Copart Worth Keeping An Eye On?

You can't deny that Copart has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Each to their own, but I think all this makes Copart look rather interesting indeed. If you think Copart might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.