CPRT: Copart
Wrecked-car auctions are a powerful franchise. The ACV deal and shrinking domestic volume complicate the return.
Copart operates global digital vehicle auctions backed by physical yards, title processing, storage and transport. Its insurer supply relationships and worldwide buyer liquidity are difficult to reproduce. FY2026 U.S. insurance volumes weakened and its $1.9B ACV acquisition now needs to prove that wholesale expansion improves per-share economics.
Copart combines a difficult-to-replicate network of vehicle yards, title processing, transportation, insurer relationships and global online auctions. The 2026 decline in domestic insurance assignments complicates the growth case just as its $1.9B ACV acquisition extends the company into dealer-to-dealer wholesale.
Why I care about this one
Most of Copart’s operating engine is a fee-based service for insurance companies and other vehicle consignors. Buyers around the world compete for cars whose remaining value depends on parts, rebuilding and export demand. Copart also sells some purchased vehicles, a lower-margin stream whose dollars should not be confused with auction service fees. If the auction website disappeared tomorrow, could someone else recreate the whole business quickly? The physical yards, transporter relationships, title work and worldwide buyer base make the answer pretty obvious. That’s the part of Copart I find so interesting.
The global buyer pool and the physical yard network strengthen one another. A competitor can launch an auction site much more easily than it can reproduce yards in the right locations, transport routes, insurer integrations and a pool of buyers ready to bid on damaged vehicles.
The company’s operating income declined to $1.65B from $1.70B even though annual sales held around $4.67B. Global units sold fell and domestic insurer assignments were hit by lower collision-claim frequency and one large customer loss. International volumes grew, but didn’t make the domestic weakness irrelevant.
Simple cash flow (operating cash less cash PPE) was $1.27B in FY2026, modestly above FY2025, but helped by lower capex. Copart also spent $1.63B repurchasing shares at an average $37.63.
The moat is not the auction website by itself. It is the network of insurer claims workflows, hard-to-zone vehicle yards, logistics and global buyers. FY2026 domestic volumes weakened even while total-loss frequency increased. ACV adds dealer relationships and digital inspection technology, but first has to earn an acceptable return on its $1.9B purchase price. Could somebody recreate all those yards, logistics and insurer relationships with a nice auction app? Good luck. I love the original franchise and now want to see ACV justify its price.
FY2026 ended July 31; ACV completed and CEO award disclosed October 16, 2026
Primary sources: Copart FY2026 10-K ↗ · FY2026 earnings and cash-flow tables ↗ · Q4 call transcript ↗ · ACV August Q2 earnings guidance ↗ · ACV closing 8-K exhibit ↗ · Oct. 16 CEO award Form 8-K ↗
Initial full Copart underwriting after October 16 ACV closing. The earlier 15.9% high-level screen required 11% EPS growth and a 22x exit; a normalized post-transaction earnings bridge and weaker FY2026 volume/earnings evidence justify a 9%/20x Base, near 10.9% annualized at Oct. 19's $27.51 close. The Oct. 16 CEO compensation 8-K proposes a 20M-share, shareholder-vote-contingent option award and reduces my Compounder capital score from 8.0 to 7.75. Scenario earnings still await actual award accounting.
Reported domestic insurer assignments stabilize and recover; ACV reaches positive GAAP margins with visible buyer/transport synergy; international unit growth and fee economics remain strong; post-deal diluted EPS grows sustainably faster than 9% without relying on repeat buybacks.
Another major insurer reassigns volume, collision claim frequency stays weak, yard costs per unit continue rising, ACV's operating losses and working-capital needs persist, the acquisition produces low ROIC, or management makes another expensive deal before integration is proven. Approval of the CEO award with substantial earnings expense or ownership dilution unaccompanied by incremental per-share value would add pressure.
What gets this into the portfolio
Standalone franchise quality passes. The post-ACV 9% EPS-growth, 20x exit Base estimates ~$46.16 in 2031, 10.9% annualized from $27.51; $22.95 would meet a 15% return with unchanged thesis. No purchase or existing holding.
Valuation & scenario math
An October 16 SEC filing describes a proposed 20M-share CEO option award requiring shareholder approval, with strikes of $26.27, $35.03, $43.78 and $52.54 and five-year vesting. Much of the incentive depends on a higher share price, which I like. The potential dilution and accounting cost are not trivial, though, especially next to $1.63B of buybacks and the ACV purchase. I reduced the Compounder capital-allocation score to 7.75/10 until the shareholder vote and compensation accounting are settled. SEC filing.
From the Oct. 19 $27.51 close, a modeled $1.50 normalized post-ACV EPS starting point grows at 2.5%/9%/15% annually for Bear/Base/Bull, valued at 14x/20x/24x in October 2031: approximately $23.76/$46.16/$72.41, or -2.9%/+10.9%/+21.4% five-year CAGRs. Base at 18x yields $41.54 and 8.6%. The 15% Base Roth hurdle suggests an entry near $22.95, subject to revised evidence. A separate pending 20M-share CEO option grant requires future GAAP expense and dilution reconciliation; these scenarios exclude that uncertain item.
The dated valuation is one input. I still compare its expected return with existing holdings, the index and the available position size before buying.
FY2031 Base value / required annualized return
| Band | Buy price | 5Y base center | 5Y CAGR at entry |
|---|---|---|---|
| Starter | $26 | $46 | +12.2% |
| Normal | $23 | $46 | +14.9% |
| Aggressive | $20 | $46 | +18.2% |
The zone label uses the live quote when available; the model itself is anchored to the Oct 19, 2026 reference close at $28. The model's $46.16 Base endpoint translates to about $26.19 at 12% annualized, $22.95 at 15% and $20.18 at 18%. My planned Roth contribution uses the 15% hurdle. Thresholds are contingent on the acquisition earnings and operating assumptions, not a price-only trigger.
Estimated $1.50 initial GAAP EPS: FY2026 $1.55 reported, approximately +$0.05 annualized share-base benefit, approximately -$0.06 foregone cash interest and -$0.04 tentative ACV/integration allowance. FY2031 per-share estimates are conditional. See the dated research for the complete operating and acquisition bridge. Proposed 20M-share CEO options are subject to approval and are not explicitly included in this first-pass earnings bridge.
| Normalized EPS today | $1.50 |
| Annual EPS growth | 9% |
| EPS by Oct 19, 2031 | ~$2.31 |
| Terminal P/E | 20x |
| Implied base price | ~$46/share |
Compounding the earnings anchor for 5 years produces approximately $2.31 of EPS. At 20x, that implies $46 per share.
| Case | What has to be true | Target range | Total return* | Annualized return* |
|---|---|---|---|---|
| Bear | 3% annual EPS growth · 14x terminal P/E. 2.5% annual GAAP EPS growth, underutilized US yards and underwhelming ACV economics; terminal 14x P/E. | $22–$25 center ~$24 | -13.6% | -2.9% |
| Base | 9% annual EPS growth · 20x terminal P/E. 9% annual GAAP EPS growth as domestic volume stabilizes, international and whole-car demand expands, and ACV eventually becomes earnings-accretive; mature 20x P/E. | $43–$49 center ~$46 | +67.8% | +10.9% |
| Bull | 15% annual EPS growth · 24x terminal P/E. 15% annual GAAP EPS growth on sustained wholesale/insurer cross-selling, stronger margins and share shrink; 24x P/E. | $67–$77 center ~$72 | +163.2% | +21.4% |
*The static returns use the dated reference price. The annualized figure on the live page also refreshes from the current quote. For shorter model horizons, annualized returns can be misleading, so I care about total return and the underlying milestones at least as much.
Capital allocation
The network economics are strong; both ACV and a large proposed CEO option award need to earn their cost.
Physical yards, operating cash flow and buyer scale underpin the core business. FY2026 repurchases exceeded simple FCF, ACV's $1.9B purchase has unproven incremental returns, and the proposed 20M-share CEO option award introduces possible dilution and GAAP compensation expense. Its long vesting and price hurdles are positive, but not costless.
Stage-relative, not some objective rating-agency grade. The number is there to force the judgment into the open. See the rubric →
What management is actually doing with the cash
Copart generated $1.604B operating cash flow and invested $337M in cash property/equipment in FY2026, then repurchased $1.633B of stock at a $37.63 average. It acquired ACV for approximately $1.9B cash in October. The balance sheet is strong; the price paid and return on the new wholesale platform remain the capital-allocation questions. An October 16 filing also disclosed a conditional 20M-share CEO option award, with shareholder approval, five-year vesting and strikes from $26.27 to $52.54. Aligning management with price growth has merit; dilution and GAAP compensation costs need a separate bridge.
How I’m thinking about an entry
My October 20 research uses the October 19 close of $27.51 and a deliberately estimated $1.50 normalized post-acquisition GAAP EPS anchor rather than mechanically projecting FY2026’s $1.55 without considering the cash spent on ACV.
These are operating-case estimates before a definitive expense and diluted-share bridge for the proposed CEO award.
Over five years I get:
- Bear: 2.5% EPS growth at 14x, approximately $23.76.
- Base: 9% EPS growth at 20x, approximately $46.16 or 10.9% annualized.
- Bull: 15% EPS growth at 24x, approximately $72.41.
The Base requires US volume stabilization, profitable integration, and respectable terminal valuation. At 18x rather than 20x Base would fall to about $41.54 or 8.6% annualized. A 15% return on the current Base calls for an entry around $22.95; that is a review point, not an automatic buy.
Read the full October research note for the earnings and cash bridges.
What can break this
Copart completed its roughly $1.9B cash acquisition of ACV on October 16, 2026. The logic is compelling: dealer supply and inspection technology on one side, yards, transport and international buyer liquidity on the other. The cost and integration economics are unproven. ACV guided to a GAAP net loss in 2026, and using its adjusted EBITDA as if it were Copart’s operating income would overstate the immediate contribution.
I care less about calling the combined company an end-to-end vehicle platform than about the incremental income and cash it generates per share.
Evidence of insurer assignment recovery, cash-generative ACV integration, sustained positive international growth and well-priced capital deployment would improve the model. Continued customer allocation loss, persistent margin dilution, additional expensive acquisitions or a weakening cash conversion would cut the forecast.
Copart brings economic exposure distinct from the AI infrastructure, cloud and advertising parts of my portfolio. That’s worth researching. It does not justify lowering the return hurdle for my next Roth contribution.