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How much a stock's price changes over time is important for most investors, since price performance can both impact your investment portfolio and help you compare investment results across sectors and industries.
The fear of missing out, or FOMO, also plays a factor in investing, especially with particular tech giants, as well as popular consumer-facing stocks.
What if you'd invested in CarMax (KMX) ten years ago? It may not have been easy to hold on to KMX for all that time, but if you did, how much would your investment be worth today?
CarMax's Business In-Depth
With that in mind, let's take a look at CarMax's main business drivers.
Headquartered in Richmond, VA, CarMax Inc. operates as a specialty retailer of used and new vehicles. The range of vehicles includes both cars and light trucks. It is one of the largest retailers of used vehicles in the United States. CarMax also provides customers with a full range of related services including financing of vehicle purchases and sale of extended warranties, accessories and vehicle repair services through CarMax Auto Finance (CAF).
CarMax is a holding company, which conducts its operations through wholly owned subsidiaries. The company operates under two reportable segments: CarMax Sales Operations and CAF. Under the CarMax Sales Operations segment, the company undertakes all auto merchandising and service operations, excluding financing. The CAF segment provides vehicle financing through CarMax stores.
CarMax acquires its used-vehicle inventory directly from consumers through its in-store appraisal process as well as from other sources including local and regional auctions, wholesalers, franchised and independent dealers and fleet owners, such as leasing and rental companies. The company conducts the in-store appraisal process through its car-buying centers (about five) intended to increase appraisal traffic and generate incremental vehicle purchases by individual consumers, but not sale of vehicles. Out of the vehicles purchased through the in-store appraisal process, those which do not meet the company’s retail standard are sold through on-site wholesale auctions.
The company has more than 200 stores worldwide. Most of its store locations are in the Southeastern United States. Chicago, Los Angeles, Houston, Dallas and Washington D.C. are some of the cities where the company enjoys a strong presence. In fiscal 2021, used vehicles contributed 82.9% while wholesale vehicles contributed 14.1% to total revenues. Other sales and revenues (such as new vehicle sales, commission on the sale of extended service plans (ESP), service department sales and third-party finance fees) contributed 3% to total revenues.
While anyone can invest, building a lucrative investment portfolio takes research, patience, and a little bit of risk. If you had invested in CarMax ten years ago, you're probably feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in September 2011 would be worth $5,111.32, or a 411.13% gain, as of September 13, 2021. Investors should keep in mind that this return excludes dividends but includes price appreciation.
In comparison, the S&P 500 gained 286.28% and the price of gold went up -5.37% over the same time frame.
Going forward, analysts are expecting more upside for KMX.
Store-expansion initiatives and high-quality product offerings are likely to boost CarMax’s prospects. The company’s omni-channel offerings to improve customer shopping experience are likely to bolster revenues. Ship-to-home next day, curb-side pick-up option, buy online, pick-up in stores and commercial customer ordering are picking pace, driving traffic to the company’s online site. Increasing sales of used vehicles remain a bright spot for the firm. The acquisition of Edmunds, completed on Jun 1, 2021, will further solidify CarMax’s position in the used auto ecosystem. the company’s long-term target of achieving $33 billion in revenue and selling 2 million units annually combined through its retail and wholesale channels by FY’26 augurs well. Given the tailwinds, the stock is viewed as a solid bet now.
Shares have gained 5.03% over the past four weeks and there have been 4 higher earnings estimate revisions for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.
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CarMax, Inc. (KMX) : Free Stock Analysis Report
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