How Financially Strong Is Copart Inc (NASDAQ:CPRT)?
Copart Inc (NASDAQ:CPRT), a large-cap worth US$11.84B, comes to mind for investors seeking a strong and reliable stock investment. Doing business globally, large caps tend to have diversified revenue streams and attractive capital returns, making them desirable investments for risk-averse portfolios. But, the key to their continued success lies in its financial health. I will provide an overview of Copart’s financial liquidity and leverage to give you an idea of Copart’s position to take advantage of potential acquisitions or comfortably endure future downturns. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into CPRT here. Check out our latest analysis for Copart
How does CPRT’s operating cash flow stack up against its debt?
Over the past year, CPRT has maintained its debt levels at around US$633.04M – this includes both the current and long-term debt. At this stable level of debt, CPRT currently has US$210.10M remaining in cash and short-term investments for investing into the business. On top of this, CPRT has generated cash from operations of US$492.06M over the same time period, leading to an operating cash to total debt ratio of 77.73%, indicating that CPRT’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In CPRT’s case, it is able to generate 0.78x cash from its debt capital.
Can CPRT meet its short-term obligations with the cash in hand?
Looking at CPRT’s most recent US$302.15M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of US$587.26M, with a current ratio of 1.94x. Usually, for Commercial Services companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is CPRT’s debt level acceptable?
CPRT’s level of debt is appropriate relative to its total equity, at 38.48%. CPRT is not taking on too much debt commitment, which may be constraining for future growth. We can test if CPRT’s debt levels are sustainable by measuring interest payments against earnings of a company. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. For CPRT, the ratio of 27.61x suggests that interest is comfortably covered. It is considered a responsible and reassuring practice to maintain high interest coverage, which makes CPRT and other large-cap investments thought to be safe.
Next Steps:
CPRT has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. I admit this is a fairly basic analysis for CPRT’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Copart to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CPRT’s future growth? Take a look at our free research report of analyst consensus for CPRT’s outlook.
Valuation: What is CPRT worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CPRT is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
