KMX - Embedded Expectations Analysis - 2021 03 02
CarMax, Inc. (KMX:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 37.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about their new marketing campaign, their ability to maximize retail GPU, and loan losses and charge-offsSpecifically, management may lack confidence in their ability to sustain Extended Protection Plan (EPP) profit growth, limit net loan losses and charge-offs, and estimate their necessary loan loss provision and cancellation reserves. In addition, they may have concerns about tighter store occupancy restrictions, the potential for further COVID-19 surges, and the sustainability of strong buy rates. Moreover, management may lack confidence in their ability to maximize gross profit per retail unit, improve retail pricing, and continue generating SG&A cost savings. Additionally, they may be exaggerating the potential of their new multimedia marketing and awareness campaign and the outperformance of longer standing stores, and they may have concerns about resuming their share buyback program
CarMax is a holding company. Through its subsidiaries, the company is engaged as a retailer of used vehicles. The company operates in two segments: CarMax Sales Operations, which sells used vehicles, purchases used vehicles from customers and other sources, sells related products and services, and arranges financing options for customers; and CarMax Auto Finance, which consists of finance operation that provides vehicle financing to customer buying retail vehicles from the company The company's products and services include retail merchandising, wholesale auctions, extended protection plans, reconditioning and service, and customer credit.
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