Should you buy Copart (CPRT) stock in 2026?

2026-07-28 · By Lubin Danilo, founder of Lubin Investment

CPRT: see the full analysis on Lubin Investment

Copart passes 8 out of 10 criteria in my quality screen and shows a rare signal: my reasonable buy-price model points to a discount of more than 100% versus the current price. The company dominates online salvage vehicle auctions, but faces a paradox: total-loss frequency is rising while the number of vehicles it receives from US insurers is declining. Here is how I settle it.

What Copart does, and why it looks like a strange business at first

When a car is damaged badly enough that repairing it would cost more than its value, the insurer declares it a total loss and needs to dispose of it. That is where Copart steps in: the company runs hundreds of auction sites worldwide where these vehicles (crashed, stolen-then-recovered, or simply end-of-life) are sold online, mainly to dismantlers, repairers, and exporters. Copart almost never owns the vehicles it sells: it acts as an intermediary on behalf of insurers, earning fees charged to both the seller and the buyer on each transaction, not a cut of the vehicle's value itself.

This fee-based model explains a number that seems contradictory at first glance in my data: the company's net cash conversion cycle comes out at 65 days, stable over five years. This is not a stock of vehicles that Copart finances on its own balance sheet (it does not own them); it is the average time between a vehicle arriving at a site and the full collection of fees tied to its auction sale. A long but predictable cycle, one that does not weigh on cash the way real physical inventory financed on credit would.

Why my quality screen validates 8 out of 10 criteria

The numbers are solid on several fronts: a 33.5% net margin (out of every $100 of billed revenue, more than a third ends up as net profit), 10.4%/year sales growth over five years, and above all 18.5%/year free cash flow per share growth, a rare pace for a company already well established in its market. Cash ROCE (the return on capital actually reinvested in the business) comes out at 25.1%, and the company carries no net debt at all: its cash exceeds its debt, a balance sheet entirely free of financial constraint.

Copart's real moat, what makes its position hard to copy, is real estate: the company owns or holds under very long-term leases thousands of acres of auction yards strategically located near major urban areas and highway corridors, accumulated over decades. A competitor wanting to replicate this network would have to buy or lease comparable land today, at far higher prices than when Copart acquired it, and negotiate with hundreds of insurers already loyal to the existing network. That is an advantage that strengthens over time rather than eroding.

Two criteria still fail, though. Operating margin compresses slightly over five years (costs, notably real estate and logistics, growing a bit faster than revenue), and cash conversion of net income reaches only 84%, a sign that part of accounting profit remains temporarily tied up before turning into real cash.

The paradox of the moment: more wrecks, but fewer vehicles coming from insurers

The 2026 industry backdrop cuts both ways. On one hand, total-loss frequency (the share of auto claims declared unrepairable rather than repaired) reached 23.6% in the first quarter of 2026, up nearly 5 percentage points over four years: rising parts and repair cost inflation, combined with pricier-to-fix electronics on modern vehicles (sensors, cameras, batteries), mechanically pushes more claims into the 'total loss' bucket rather than repair, which structurally feeds the volume available for Copart's auctions.

On the other hand, the number of vehicles Copart obtains directly from US insurance carriers declined roughly 9.5% over a recent quarter. The cause is not a Copart-specific problem: it is a shift in driver behavior, with motorists cutting coverage (less comprehensive/collision insurance, higher deductibles) in response to rising auto insurance premiums, which mechanically reduces the number of claims filed and sent to auction. Some investors, such as manager Renaissance Investment Management, which exited its position citing deteriorating fundamentals, see this as a real structural risk rather than a mere quarterly hiccup.

The price: a rare signal in my model

Copart trades at 22.8 times its trailing-twelve-month free cash flow, a multiple sitting at the 12th percentile of its own five-year history: in other words, the stock has been this cheap relative to itself only about 12.4% of the time over that period. That is a rare signal, almost the opposite of what one typically sees on a stock that also happens to trade near its all-time price highs: the valuation compresses even as the price does not collapse, because free cash flow per share has grown faster than the stock price itself.

My reasonable buy-price model, based on the actual five-year cash trajectory, comes out at $61.50, against a current price of $30.69: a discount of more than 100%. This is the kind of signal my screen triggers rarely, and it deserves to be taken seriously without being taken at face value: it assumes that the past five years' 18.5%/year free cash flow per share growth continues, which is precisely the question raised by the recent pullback in insurer vehicle flow. If that pullback is only a temporary adjustment offset by the structural rise in total-loss frequency, the discount is a genuine opportunity. If it reflects a lasting shift in policyholder behavior, the past growth trajectory is a less reliable guide to the future.

Copart passes 8 out of 10 criteria: 33.5% net margin, 18.5%/year FCF per share growth, 25.1% Cash ROCE, no net debt. The moat comes from real estate accumulated over decades near major urban areas.
The tension of the moment: total-loss frequency is rising (23.6% in Q1 2026, +5pts over 4 years, a structural tailwind), but the flow of vehicles from US insurers is declining (-9.5% over a recent quarter, a shift in policyholder behavior).
The 22.8x P/FCF sits at the 12th percentile of Copart's 5-year history: rarely this cheap relative to itself. My model targets a $61.50 buy price against a $30.69 price, a discount of more than 100%.
The real bet: is the decline in insurer flow temporary (offset by rising total-loss frequency) or structural? This is not investment advice, do your own research.

FAQ

Does Copart own the vehicles it auctions?

Almost never. Copart acts as an intermediary on behalf of insurers and earns fees charged to both seller and buyer on each transaction, not a cut of the vehicle's value. This is what keeps its balance sheet so light.

Why is total-loss frequency rising?

Because parts and repair costs keep climbing, and modern vehicles (sensors, cameras, batteries) are more expensive to fix after a crash. A claim that would have been repaired ten years ago is now more often declared a total loss, feeding the volume available for Copart's auctions.

Why is the number of vehicles coming from insurers declining then?

Because drivers are cutting coverage (less comprehensive/collision insurance, higher deductibles) in response to rising auto insurance premiums, which mechanically reduces the number of claims filed and thus the vehicles sent to auction.

Why is Copart's P/FCF so low if the stock is near its highs?

Because free cash flow per share has grown faster than the stock price in recent years (+18.5%/year), which compresses the multiple even without a price pullback.

Should you buy Copart stock in 2026?

My model shows a rare discount signal, but it assumes past free cash flow growth continues despite the recent pullback in insurer vehicle flow. That is a real tension to settle, not an obvious call. This is not personalized investment advice, do your own research.

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).