company background image
KAR

KAR Auction Services NYSE:KAR Stock Report

Last Price

US$16.28

Market Cap

US$1.9b

7D

-4.8%

1Y

-13.0%

Updated

07 Aug, 2022

Data

Company Financials +
KAR fundamental analysis
Snowflake Score
Valuation3/6
Future Growth3/6
Past Performance0/6
Financial Health3/6
Dividends0/6

KAR Stock Overview

KAR Auction Services, Inc., together with its subsidiaries, provides used vehicle auctions and related vehicle remarketing services for the automotive industry in the United States, Europe, Canada, Mexico, and the United Kingdom.

KAR Auction Services Competitors

Price History & Performance

Summary of all time highs, changes and price drops for KAR Auction Services
Historical stock prices
Current Share PriceUS$16.28
52 Week HighUS$22.10
52 Week LowUS$11.76
Beta1.07
1 Month Change3.23%
3 Month Change25.42%
1 Year Change-12.99%
3 Year Change-33.90%
5 Year Change-62.18%
Change since IPO35.33%

Recent News & Updates

Jul 14
These 4 Measures Indicate That KAR Auction Services (NYSE:KAR) Is Using Debt Extensively

These 4 Measures Indicate That KAR Auction Services (NYSE:KAR) Is Using Debt Extensively

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the...

Jul 13

KAR Auction Services: 'New' KAR On Offer At A Bargain Price

KAR Auction Services hosted an investor update outlining its updated guidance numbers post-sale of its physical auction business. With secular growth and margin tailwinds intact over the long term and the financing arm also holding up well, there is a lot to be optimistic about. KAR stock has likely priced in most of the negatives at an inexpensive ~9x EV/EBITDA. Having completed the sale of its physical auction business, KAR Auction Services, Inc. (KAR) held a positive investor update on the outlook for the "new" KAR. This covered its digital dealer-to-dealer auction operations and automotive finance floorplan financing business, as well as long-term P&L projections through 2025. While a potential macro downturn poses a near-term headwind, the secular growth trend remains intact, particularly in the digital space. Plus, KAR continues to hold a strong competitive position as the second-largest whole car auction services provider, driving resilient pricing, margins, and strong through-cycle free cash flow. With KAR stock largely discounting the negatives at an inexpensive ~9x EV/EBITDA, despite the potential for a near doubling of EBITDA through 2025, I like the risk/reward at these levels. Marketscreener Digital Dealer-to-Dealer is the Key Growth Driver The successful ADESA divestiture means KAR now has an increased focus on the more nimble and asset-light digital model. Per management's updated estimates, the market opportunity is massive at ~10m annual addressable transactions for digital dealer-to-dealer. This number includes 40m and 20m in used retail and wholesale vehicle transactions, respectively, with >100k market participants on both the buy and sell-side (e.g., dealers, commercial sellers, and buyers). KAR sizes its remaining potential annual unit market opportunity at 2-4m off-lease vehicles and 2m repossessions. I wouldn't be surprised to see this number grow further in the coming years, though, given the industry has been accelerating its shift online each year. From ~4% digital in Q4 2019, the digital contribution has reached ~13% in Q1 2022 amid post-COVID tailwinds as well as the improved transparency/trust offered by the online channel. KAR Global In a testament to management's optimism on digital dealer-to-dealer, segmental revenue growth is now guided to hit an impressive 30% CAGR (excluding purchased vehicle revenue) through 2025 - a step-up in growth from recent trends. There is a margin opportunity here as well - the consolidation of CARWAVE and BacklotCars in the U.S., expected to be completed later this year, is guided to also drive expense reductions. Additionally, consolidation efforts are ongoing for the TradeRev and ADESA Canada digital marketplaces - the vision is for a single online venue providing access to the entire Canadian buyer base, which, if completed by 2023, should also unlock margin benefits. That said, the dealer-to-dealer business will likely remain pressured in the near term amid low dealer inventories due to challenges with new vehicle production. Still, the ~6% organic unit growth in Q1 2022 indicates demand resilience, and as supply chains recover over time, the structural tailwinds should support the mid-term revenue target. Automotive Financing Stays Strong in the Face of a Rate Hike Cycle Even with rates on the rise, KAR's automotive financing ((AFC)) results have remained strong on higher penetration across digital channels and resilient dealer profitability, both of which have kept charge-offs at very manageable levels. That said, the continued pressure in wholesale volumes is a concern, particularly through the back half of this year and perhaps even through 2023 as interest rates reach peak levels. Still, KAR has guided to a revenue CAGR of ~11% to 2025 within the segment, alongside an ~5% EBITDA CAGR - a potentially achievable target if the >55% fee-based revenue contribution (in-line with the implementation of the new Lien Pay program) is realized. The ramp-up of fee and product-based revenues will be key - these revenue streams are less cyclical and should insulate the segment if a moderating used vehicle price scenario materializes. KAR Global A Net Positive P&L Update KAR also introduced several new mid-term targets through 2025, starting with a ~13% revenue CAGR, which will be supplemented by cost-out initiatives to drive a ~20% EBITDA CAGR (excluding investment gains) or ~$500m in mid-term EBITDA. In total, KAR is targeting a cumulative >$700m in cash from operations over the 2022-2025 period as well. Beyond growth in the core auctions business, a cyclical off-lease vehicle recovery and share gains in the high-growth digital dealer-to-dealer wholesale auctions present upside to these targets. Somewhat surprisingly, management is sticking with its guidance for $265m in EBITDA this year - a major positive given this implies a ramp from Q1 2022 levels despite volume challenges (expected due to the ongoing rate hikes). KAR Global

Shareholder Returns

KARUS Commercial ServicesUS Market
7D-4.8%1.1%1.0%
1Y-13.0%-1.4%-12.9%

Return vs Industry: KAR underperformed the US Commercial Services industry which returned -1.4% over the past year.

Return vs Market: KAR matched the US Market which returned -12.9% over the past year.

Price Volatility

Is KAR's price volatile compared to industry and market?
KAR volatility
KAR Average Weekly Movement6.4%
Commercial Services Industry Average Movement6.8%
Market Average Movement7.9%
10% most volatile stocks in US Market17.1%
10% least volatile stocks in US Market3.2%

Stable Share Price: KAR is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.

Volatility Over Time: KAR's weekly volatility (6%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
20068,928Peter Kellyhttps://www.karglobal.com

KAR Auction Services, Inc., together with its subsidiaries, provides used vehicle auctions and related vehicle remarketing services for the automotive industry in the United States, Europe, Canada, Mexico, and the United Kingdom. The company operates through two segments, ADESA Auctions and AFC. The ADESA Auctions segment offers whole car auctions and related services to the vehicle remarketing industry through online auctions and auction facilities.

KAR Auction Services Fundamentals Summary

How do KAR Auction Services's earnings and revenue compare to its market cap?
KAR fundamental statistics
Market CapUS$1.89b
Earnings (TTM)-US$100.00k
Revenue (TTM)US$2.26b

0.8x

P/S Ratio

9,999x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
KAR income statement (TTM)
RevenueUS$2.26b
Cost of RevenueUS$1.31b
Gross ProfitUS$945.70m
Other ExpensesUS$945.80m
Earnings-US$100.00k

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-0.00086
Gross Margin41.86%
Net Profit Margin-0.004%
Debt/Equity Ratio121.9%

How did KAR perform over the long term?

See historical performance and comparison
We’ve recently updated our valuation analysis.

Valuation

Is KAR undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

  • Price-To-Sales vs Peers

  • Price-To-Sales vs Industry

  • Price-To-Sales vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for KAR?

Other financial metrics that can be useful for relative valuation.

KAR key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue2x
Enterprise Value/EBITDA12.6x
PEG Ration/a

Price to Sales Ratio vs Peers

How does KAR's PS Ratio compare to its peers?

KAR PS Ratio vs Peers
The above table shows the PS ratio for KAR vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPSEstimated GrowthMarket Cap
Peer Average7.6x
ACVA ACV Auctions
3.1x26.1%US$1.2b
HCSG Healthcare Services Group
0.6x0.9%US$1.0b
AUR Aurora Innovation
25.1x54.1%US$3.1b
UNF UniFirst
1.8x5.7%US$3.6b
KAR KAR Auction Services
0.8x1.0%US$1.9b

Price-To-Sales vs Peers: KAR is good value based on its Price-To-Sales Ratio (0.8x) compared to the peer average (7.6x).


Price to Earnings Ratio vs Industry

How does KAR's PE Ratio compare vs other companies in the US Commercial Services Industry?

Price-To-Sales vs Industry: KAR is good value based on its Price-To-Sales Ratio (0.8x) compared to the US Commercial Services industry average (1.4x)


Price to Sales Ratio vs Fair Ratio

What is KAR's PS Ratio compared to its Fair PS Ratio? This is the expected PS Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

KAR PS Ratio vs Fair Ratio.
Fair Ratio
Current PS Ratio0.8x
Fair PS Ratio1.1x

Price-To-Sales vs Fair Ratio: KAR is good value based on its Price-To-Sales Ratio (0.8x) compared to the estimated Fair Price-To-Sales Ratio (1.1x).


Share Price vs Fair Value

What is the Fair Price of KAR when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: KAR ($16.28) is trading above our estimate of fair value ($2.31)

Significantly Below Fair Value: KAR is trading above our estimate of fair value.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price, but analysts are not within a statistically confident range of agreement.


Discover undervalued companies

Future Growth

How is KAR Auction Services forecast to perform in the next 1 to 3 years based on estimates from 9 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


179.7%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: KAR is forecast to become profitable over the next 3 years, which is considered faster growth than the savings rate (1.9%).

Earnings vs Market: KAR is forecast to become profitable over the next 3 years, which is considered above average market growth.

High Growth Earnings: KAR is expected to become profitable in the next 3 years.

Revenue vs Market: KAR's revenue (1% per year) is forecast to grow slower than the US market (7.9% per year).

High Growth Revenue: KAR's revenue (1% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if KAR's Return on Equity is forecast to be high in 3 years time


Discover growth companies

Past Performance

How has KAR Auction Services performed over the past 5 years?

Past Performance Score

0/6

Past Performance Score 0/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


-60.1%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: KAR is currently unprofitable.

Growing Profit Margin: KAR is currently unprofitable.


Past Earnings Growth Analysis

Earnings Trend: KAR is unprofitable, and losses have increased over the past 5 years at a rate of 60.1% per year.

Accelerating Growth: Unable to compare KAR's earnings growth over the past year to its 5-year average as it is currently unprofitable

Earnings vs Industry: KAR is unprofitable, making it difficult to compare its past year earnings growth to the Commercial Services industry (23.5%).


Return on Equity

High ROE: KAR has a negative Return on Equity (1.86%), as it is currently unprofitable.


Discover strong past performing companies

Financial Health

How is KAR Auction Services's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: KAR's short term assets ($4.0B) exceed its short term liabilities ($3.5B).

Long Term Liabilities: KAR's short term assets ($4.0B) exceed its long term liabilities ($336.7M).


Debt to Equity History and Analysis

Debt Level: KAR's net debt to equity ratio (86%) is considered high.

Reducing Debt: KAR's debt to equity ratio has reduced from 268.2% to 121.9% over the past 5 years.

Debt Coverage: KAR's operating cash flow is negative, therefore debt is not well covered.

Interest Coverage: KAR's interest payments on its debt are not well covered by EBIT (1.5x coverage).


Balance Sheet


Discover healthy companies

Dividend

What is KAR Auction Services's current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage

Dividend Yield vs Market

Notable Dividend: Unable to evaluate KAR's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate KAR's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.


Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if KAR's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if KAR's dividend payments have been increasing.


Earnings Payout to Shareholders

Earnings Coverage: KAR is not paying a notable dividend for the US market.


Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as KAR has not reported any payouts.


Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

5.5yrs

Average management tenure


CEO

Peter Kelly (53 yo)

1.33yrs

Tenure

US$8,477,933

Compensation

Mr. Peter J. Kelly serves as Chief Executive Officer and Director KAR Auction Services, Inc. since April 01, 2021. He served as President at KAR Auction Services, Inc. since January 7, 2019 until March 202...


CEO Compensation Analysis

Compensation vs Market: Peter's total compensation ($USD8.48M) is above average for companies of similar size in the US market ($USD5.42M).

Compensation vs Earnings: Peter's compensation has increased whilst the company is unprofitable.


Leadership Team

Experienced Management: KAR's management team is seasoned and experienced (5.5 years average tenure).


Board Members

Experienced Board: KAR's board of directors are considered experienced (3 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: KAR insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

KAR Auction Services, Inc.'s employee growth, exchange listings and data sources


Key Information

  • Name: KAR Auction Services, Inc.
  • Ticker: KAR
  • Exchange: NYSE
  • Founded: 2006
  • Industry: Diversified Support Services
  • Sector: Commercial Services
  • Implied Market Cap: US$1.886b
  • Shares outstanding: 115.83m
  • Website: https://www.karglobal.com

Number of Employees


Location

  • KAR Auction Services, Inc.
  • 11299 North Illinois Street
  • Carmel
  • Indiana
  • 46032
  • United States

Listings


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/08/07 00:00
End of Day Share Price2022/08/05 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.