CPRT

Copart operates the toll bridge between wrecked cars and the global buyers who want them — a two-sided auction marketplace that charges fees on both sides of every transaction without ever owning inventory or taking title risk. The business has grown net income every single year for fifteen consecutive years, from $166 million to $1.55 billion, while carrying zero debt and accumulating $5.1 billion in cash. This is a junkyard disguised as a network-effects monopoly, processing total-loss vehicles through 80-90% market share in a duopoly where switching costs are measured in dollars-per-vehicle that insurers cannot afford to leave on the table.

Mr. Market is pricing Copart as an 8-9% grower at 21x earnings, despite a 13-year EPS CAGR of 19.5% and a secular tailwind — total-loss frequency rising from 15.6% to 24.2% over the past decade — that requires no management brilliance to sustain. The current insurance volume headwind (U.S. units down 10.7%) is cyclical, not structural, and management has finally begun deploying the $5.1 billion cash pile into buybacks ($500M year-to-date in FY2026), converting dead capital into per-share compounding. At $33.39, the operating enterprise trades at 14.2x EBITDA and 22x operating FCF — a fair price for a good business, but a bargain price for one of the best compounders in industrial services.

The insurance volume decline is the immediate concern: U.S. units fell 10.7% in the most recent quarter as carriers tightened underwriting, and if consumer coverage loss proves structural rather than cyclical, the revenue growth engine downshifts permanently from 12% to 6-8%. Operating margins have compressed 570 basis points from 42.2% (2021) to 36.5% (2025), driven by aggressive investment in sales force, technology, and international expansion — spend that has not yet produced proportional revenue acceleration. The total-loss frequency tailwind faces mathematical deceleration as the rate approaches 25%, and IAA under RB Global ownership could eventually narrow the buyer liquidity gap if they invest intelligently in their marketplace.