For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. For example, the Copart, Inc. (NASDAQ:CPRT) share price is up a whopping 477% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 17% gain in the last three months.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, Copart managed to grow its earnings per share at 29% a year. This EPS growth is slower than the share price growth of 42% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Copart has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
A Different Perspective
It's nice to see that Copart shareholders have received a total shareholder return of 41% over the last year. However, the TSR over five years, coming in at 42% per year, is even more impressive. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for Copart that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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What are the risks and opportunities for Copart?
Trading at 3.9% below our estimate of its fair value
Earnings are forecast to grow 12.28% per year
Earnings have grown 23.4% per year over the past 5 years
No risks detected for CPRT from our risks checks.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Copart, Inc. provides online auctions and vehicle remarketing services in the United States, Canada, the United Kingdom, Brazil, the Republic of Ireland, Germany, Finland, the United Arab Emirates, Oman, Bahrain, and Spain.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
|Analysis Area||Score (0-6)|
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet with acceptable track record.