# Copart (CPRT) — Financial Analysis

**Exchange:**   
**Coverage as of:** 2026-Q2  
**Updated:** 2026-06-04  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/CPRT/thesis · /stocks/CPRT/memo

## Financial Snapshot

---
source: coverage-next-full
step: 04
ticker: CPRT
company: Copart, Inc.
generated: 2026-06-04
---

### Step 04 — Financial Quality & Adversarial Research Sweep
#### Copart, Inc. (CPRT)

---

#### 1. Financial Statement Quality Assessment

##### Income Statement Quality

**Revenue recognition:** Service revenue is recognized upon vehicle sale completion (performance obligation fulfilled). Vehicle sales recognized at point of sale. Both are straightforward and low-risk under ASC 606. No complex multi-element arrangements, subscription deferrals, or licensing revenue that could distort timing. [S1]

**Gross margin stability:** ~45% gross margins for 6 consecutive years (FY2019–FY2025) suggest a stable cost pass-through model where towing, storage, and processing costs are fairly predictable relative to volume. No evidence of margin manipulation. [S1]

**Operating leverage:** The ~600 bps decline in operating margins from the FY2021 peak (42.2%) to FY2025 (36.5%) reflects genuine headwinds: increased CapEx flowing through higher D&A ($159.5M→$215.8M), International ramp costs, and the Progressive Insurance volume loss. These are real economic shifts, not accounting noise.

**Effective tax rate:** The ETR has declined from 26-37% pre-2019 to 16-21% in recent years. The driver is substantial stock option exercises at Copart — when employees exercise options, the company gets a tax deduction for the intrinsic value, generating "windfall" tax benefits that reduce the reported ETR. This is a real benefit (not an accounting distortion) but can create year-to-year volatility in reported ETR. FY2025 ETR was 18.3%; normalized rate ~21-22%. [S1]

##### Cash Flow Quality

**OCF conversion:** FY2025 OCF of $1,799.8M vs. net income of $1,552.4M = 115.9% conversion ratio. This is excellent and driven by:
- Non-cash D&A ($215.8M)
- Non-cash SBC ($38.0M)
- Favorable working capital changes (~$150-200M) from vehicle consignment model (Copart collects buyer proceeds quickly, pays sellers on defined terms)

**CapEx intensity:** FY2025 CapEx was $569.0M (12.2% of revenue), up from $337.4M in FY2022. This elevated level reflects the deliberate land expansion strategy (~$500M/yr guided for near-term). CapEx is almost entirely maintenance + expansion of the yard network — no transformative M&A. [S2]

**Free cash flow trend:** FCF has grown from $272.7M (FY2019) to $1,230.8M (FY2025) — a 4.5x increase over 6 years. FCF conversion (FCF/Net Income) was 79% in FY2025, consistent with prior years. High quality.

##### Balance Sheet Quality

| Item | Assessment |
|------|-----------|
| Cash + Restricted Cash | $2,780.5M as of July 2025 (real; invested in treasuries + money market) |
| PP&E Net | $3,598.1M — primarily owned land; fair value likely significantly exceeds book value |
| Long-term Debt | ~$0 (debt-free since FY2022) |
| Stockholders Equity | ~$9.2B (estimated as Total Assets $10.09B less Liabilities $0.88B) |
| Goodwill + Intangibles | Minimal; most acquisitions were small tuck-in yard purchases |
| Operating Lease Obligations | Present but manageable (leased yards; not modeled as debt in base case) |

**Land value upside:** Copart owns >21,000 acres, mostly in suburban/industrial areas near major metro areas. Replacement cost and fair value of this land is almost certainly substantially above book value (historical cost). This is an underappreciated hidden asset.

##### Accounting Adjustments

No material adjustments required:
- No evidence of aggressive revenue recognition
- No concerning off-balance-sheet liabilities beyond normal operating leases
- SBC ($38M, 0.8% of revenue) is modest and stable — not masking true economic cost
- No material restatements in filing history reviewed

#### 2. Adversarial Research Sweep

##### Short Thesis Investigation

**Known short/critical narratives (per industry research and press search):**

**Bear #1: Progressive Insurance Volume Loss (Real and Active) [S3]**
Progressive reportedly shifted 75-90% of its salvage volume from Copart to RB Global/IAA in calendar 2024-2025. Progressive represents a meaningful portion of Copart's insurer mix. This is not speculation — it is reflected in FY2026 volume trends (Q1 and Q2 FY2026 revenues below prior-year quarters). The risk is real.
*Assessment: Confirmed. Already reflected in FY2026 guidance cuts. Key question is whether this is permanent structural share loss or a negotiating cycle.*

**Bear #2: EV Battery Salvage Value Impairment (Medium-Term) [S4]**
As EV penetration rises, there is debate over whether damaged EV batteries represent a liability (hazmat disposal) or asset (refurbishment/reuse). If batteries become a cost center rather than a revenue center, average salvage recovery values per EV unit could decline, pressuring per-unit service fees.
*Assessment: Real long-term risk; 5-10 year horizon; magnitude uncertain. Copart is actively investing in EV handling capabilities. Not an immediate earnings risk.*

**Bear #3: RB Global Platform Investment (Competitive Risk) [S3]**
Post-IAA acquisition, RB Global has invested heavily in its technology platform and buyer network. If it narrows the buyer network gap (currently ~1M Copart members vs. ~600K RB Global), pricing and volume dynamics could shift.
*Assessment: Legitimate competitive concern; monitoring required. Current buyer network advantage still substantial.*

##### Litigation and Regulatory Check

**No material pending litigation identified** from 10-K review and press search. Historical items:
- Environmental remediation obligations at some legacy yard sites (disclosed in 10-K, reserved for, immaterial to financials)
- Standard employment/wage claims in California (recurring, immaterial)
- No SEC investigations, restatements, or material regulatory actions found

##### Short Interest Check
At time of data collection, short interest on CPRT is not available from the sources accessed. Given the ~40% stock decline from highs, short interest may be elevated. No dedicated short campaigns identified from public sources.

##### Red Flags Assessment

| Category | Flag? | Detail |
|----------|-------|--------|
| Revenue recognition | None | Standard consignment fee model; straightforward |
| Related party transactions | None material | Founder/family relationships (Johnson/Adair) disclosed but no material RPT concerns in recent proxy |
| Audit quality | None | Big Four auditor (Ernst & Young); clean opinions throughout |
| Insider selling | Elevated but pre-planned | Director/exec option exercises in CY2025 under 10b5-1 plans; not opportunistic |
| Accounting restatements | None found | Clean filing history |
| Off-balance-sheet risks | Minor | Operating leases for some yard locations; standard |
| Governance concerns | Moderate | Founder-era control culture (Johnson/Adair family); annual election/no staggered board but concentrated ownership ~9.6% insiders |

**ADVERSARIAL SWEEP CONCLUSION:** No material red flags. The Progressive Insurance volume loss is the most significant near-term risk and is well-documented and priced-in. Financial quality is high. No accounting, governance, or litigation concerns that would alter the fundamental analytical framework.

#### 3. Key Financial Ratios (FY2025)

| Ratio | Value | Commentary |
|-------|-------|-----------|
| P/E (TTM) | 19.2x | At $30.35; below 5-year avg ~28-35x |
| EV/EBITDA | 12.1x | Near trough; historically 20-30x |
| P/FCF | 22.8x | $28.1B cap / $1.23B FCF |
| P/S | 6.0x | Below 5-yr avg |
| ROIC (est.) | ~26% | See Step 09 |
| Net Debt/EBITDA | -1.8x | Net cash position |
| FCF Yield | 4.4% | $1.23B / $28.1B |
| FCF Conversion | 79% | FCF/Net Income |
| OCF Conversion | 116% | OCF/Net Income |

#### 4. Source Index

[S1] SEC XBRL + 10-K filings: `xbrl/xbrl_summary.md`, `sec_filings/10K_FY2025_summary.md`
[S2] CapEx/FCF detail: `xbrl/xbrl_summary.md`
[S3] Competitive/consensus: `industry/competitive_landscape.md`, `other/consensus.md`
[S4] EV risk: `industry/market_overview.md`

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/CPRT/fundamental

## Navigation

- Overview: /stocks/CPRT
- Financials (this page): /stocks/CPRT/financials
- Thesis: /stocks/CPRT/thesis
- Investment Memo: /stocks/CPRT/memo
- Coverage universe: /stocks