KMX - Embedded Expectations Analysis - 2021 11 05
CarMax, Inc. (KMX) currently trades near its historical averages but higher than corporate averages relative to Uniform earnings, with a 31.2x Uniform P/E (Fwd. V/E').At these levels, markets are pricing in expectations for Uniform ROA to reach new peaks, accompanied by 5% Uniform asset growth.
Similarly, if sustained in perpetuity, analyst expectations for 5% Uniform ROA and 12% Uniform asset growth imply a stock price closer to $130, representing approximately 5% equity downside for the firm.
Moreover, the firm's most recent earnings call suggests management may have concerns about inventory headwinds, auto sales, and CAF.
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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