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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Investment Strategies / Falling Knives
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Author: mungofitch ✹✺🐝 SILVER
SHREWD
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Number: of 1198 
Subject: FKA, still: KMX
Date: 08/08/25 8:28 AM
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No. of Recommendations: 23
I'm stubborn, and therefore repetitive.
So for those few who might be interested, I really do think that Carmax is probably a good deal at these levels ($55.25).

They were a wonderful firm till the pandemic. Then they made bubble-style profits for a while during the post-pandemic car shortage. Then they had a wee hangover from the rush, now they are perhaps rising from the doldrums (?). The question is, will they get back anywhere near the old normal in terms of operating results, or were the original results in the 2010s the unsustainable thing?

Consider what might be the old normal. Before the pandemic-related bubble earnings (EPS $6.97 in 2021), they made $5.33 in 2019 on $124.60 in sales. Earnings were very typical as a fraction of cash flow that year. Both were good, but not outliers compared to the trend till then. For a sense of scale, today's price is only 10.3 times that old earnings figure, while sales per share are up about 46% since then. If net margins recover even part way, a very good outcome might be expected.

They're doing big buybacks at these low prices, a million shares a month out of ~150 million.

Recent results were good compared to same quarter a year ago. Revenues up 6.1%, retail unit sales up 9%, comparable store-level unit sales up 8.1%, record gross profit per unit, gross profit up 12.8%.

I always liked their business model, so I think that the low-medium-high scenarios are all double digit returns from here in the next few years. (the lowest scenario is always an asteroid-strike zero, of course)

Jim
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