No. of Recommendations: 3
Bankman actually started the thread on Dec 21st, with a link to the Q3 results:
https://seekingalpha.com/news/4048983-carmax-gaap-...They were at $80 pre-market last month after the Q3 report, but the share price has given up all those gains and drifted back to $70, about where it was 5 weeks ago, before the Q3 report.
My read on the Q3 results: nothing very convincingly positive or negative. Unit sales are about stable year over year, down a bit for retail and up a bit for wholesale. Revenues are down a bit because of weaker used car prices, but their margins have remained about $2200 per retail unit and about $1000 per wholesale unit, and they have cut their SG&A expenses a bit, so eps was up year over year from 0.24 to 0.52. Last 12 months earnings were about $500m, and with their market cap of $11b, that means they are trading at a multiple of 22. If they could get back to their pre-COVID $888m in earnings, today's price would represent a multiple of 12.
I have been sitting on the fence. On the plus side: they have a good balance sheet and they are profitable, so they can outlive a lot of their competition, which is suffering with high interest rates limiting affordability. They have historically been a strong grower, they have historically reduced share counts and resumed repurchases last quarter, and they have a long runway of growth with a good business model (fixed prices, relatively fixed reasonable profit margins, growing use of on-line transactions now up to 14% of their sales.) On the negative side, a recovery is already partially priced in and hasn't happened yet, and interest rates may remain high for a long time.
I guess I may have convinced myself to add a little, but I would add a lot if the price dipped back down towards $60, or even under $56, as it did a month after Q2 results.
dtb
