CarMax (KMX): Revisiting Valuation After a Year of Heavy Share Price Losses

CarMax (KMX) has quietly turned into a value puzzle for investors, with the stock sliding more than 50% over the past year even as annual net income edged higher.

See our latest analysis for CarMax.

That backdrop helps explain why, even with a modest 7 day share price return of 2.15 percent, CarMax’s 1 year total shareholder return of negative 53.34 percent signals sentiment and momentum are still firmly under pressure rather than turning.

If CarMax’s slump has you reassessing the auto space, it could be worth scanning other auto manufacturers to spot where the market is pricing in stronger execution and recovery potential.

With earnings still growing, revenue slipping, and the share price languishing near analyst targets, is CarMax now a classic value play waiting to re rate, or is the market already baking in muted growth ahead?

Most Popular Narrative Narrative: 2% Undervalued

Compared with CarMax’s last close at $39.02, the most followed narrative sees fair value only slightly higher, framing today’s weakness as a marginal discount.

To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report. Given the current share price of $61.38, the analyst price target of $81.44 is 24.6% higher.

Read the complete narrative.

Curious how modest top line expectations, expanding margins, and a richer future earnings multiple can still support upside from here? The full narrative breaks down the math, the timeline, and the assumptions behind that seemingly small discount.

Result: Fair Value of $39.83 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rising loan loss provisions and persistent margin pressure from tougher vehicle sourcing could still derail the recovery story that is reflected in today’s fair value.

Find out about the key risks to this CarMax narrative.

Build Your Own CarMax Narrative

If you see the story differently, or simply want to dig into the numbers yourself, you can build a custom view in minutes using Do it your way.

A great starting point for your CarMax research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Before you move on, consider scanning focused stock shortlists built from real fundamentals, not hype or headlines.

• Explore potential upside in overlooked companies by screening through these 3571 penny stocks with strong financials that pair small size with financial strength.
• Look for structural trends in automation and smart software with these 25 AI penny stocks that are positioned at the center of the AI boom.
• Review quality businesses selling at a discount using these 920 undervalued stocks based on cash flows where the market price may lag long term cash flow potential.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com