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What Should You Know About CarMax, Inc.'s (NYSE:KMX) Future?

Simply Wall St

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In February 2019, CarMax, Inc. (NYSE:KMX) released its earnings update. Generally, analyst forecasts seem fairly subdued, with earnings expected to grow by 2.3% in the upcoming year relative to the higher past 5-year average growth rate of 7.8%. Currently with trailing-twelve-month earnings of US$842m, we can expect this to reach US$862m by 2020. Below is a brief commentary on the longer term outlook the market has for CarMax. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

See our latest analysis for CarMax

Can we expect CarMax to keep growing?

The 15 analysts covering KMX view its longer term outlook with a positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for KMX, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NYSE:KMX Past and Future Earnings, May 31st 2019

From the current net income level of US$842m and the final forecast of US$992m by 2022, the annual rate of growth for KMX’s earnings is 4.0%. EPS reaches $6.51 in the final year of forecast compared to the current $4.83 EPS today. In 2022, KMX's profit margin will have expanded from 4.4% to 4.5%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For CarMax, I've compiled three essential factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is CarMax 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 CarMax is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CarMax? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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.

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. Thank you for reading.