Invite ye felawes and frendes desirous in gold to enter the gates of Shrewd'm, for they will thanke ye later.
- Manlobbi
Stocks A to Z / Stocks K / CarMax (KMX)
No. of Recommendations: 2
No. of Recommendations: 6
The two positives I took away were:
1. Q4 retail used car sales were up year over year. It is the first yoy increase in nine straight quarters. I don’t think the used market has turned the corner yet but maybe we have reached the “it can’t get any worse” point. Along the same line, net earnings per retail location were “only” down about -5% from last year. Overall net earnings were only off -1% so hopefully the five new locations will start to perform this year.
2. In the press release they indicated they plan to ramp up share buybacks this year. They barely offset dilution last year so that would seem to be a positive as well. They were routinely buying back enough to retire 5% of the common shares prior to 2020 and it would be nice to see them return to those levels if possible.
They continue to plug along grossing the same $2250 per vehicle. Once the used car market ramps back up they should be back to netting $3.5M to $4M per location. Just a matter of how long it takes.
Jeff
No. of Recommendations: 3
...net earnings per retail location were “only” down about -5% from last year. Overall net earnings were only off -1% so hopefully the five new locations will start to perform this year.
2. In the press release they indicated they plan to ramp up share buybacks this year. They barely offset dilution last year so that would seem to be a positive as well. They were routinely buying back enough to retire 5% of the common shares prior to 2020 and it would be nice to see them return to those levels if possible.
They continue to plug along grossing the same $2250 per vehicle. Once the used car market ramps back up they should be back to netting $3.5M to $4M per location. Just a matter of how long it takes.
I'm late to this party, but I agree, this is a waiting game, with no immediate signs of any major improvement. To invest in this $11b market cap company you have to believe that the $479m in net earnings they made last quarter is very likely to bounce back closer to the $888m they made in pre-COVID 2020 and not drag on for too long, taking their P/E back from 23 to 12. I am maybe little less confident about how likely that is, but I still think it's a fair bet, given their historical rates of growth.
dtb
No. of Recommendations: 3
To invest in this $11b market cap company you have to believe that the $479m in net earnings they made last quarter is very likely to bounce back closer to the $888m they made in pre-COVID 2020 and not drag on for too long, taking their P/E back from 23 to 12.
In their fiscal years ending in February 2019 and 2020 they were able to earn $842M and $888M respectively. Rates were only about 100bps lower back then than they are right now. High interest rate environments are typically good for used cars/equipment because they have traditionally been more affordable compared to like new options.
The current challenge is the price run ups on all goods has caused used cars to be rather unaffordable for many consumers. The market will heal itself but it’s going to take some pain in the rationalization of prices both for the holders of the used inventory and buyers. These things take time. I think it’s pretty likely they can get back to ~3500 new units per store in the next 12-18mo. If they can do that then they should net $3-3.5M per store easily and get them back to the $800M+ level.
I would love to see another positive comp number this quarter to signal they are on the way.
Jeff
