Taking the lead: CarMax Inc. (KMX)

CarMax Inc. (NYSE: KMX) stock jumped 0.79% on Friday to $99.80 against a previous-day closing price of $99.02. With 1.02 million shares changed hands, the volume of the stock remained lighter than its average volume of 1.67 million shares. During the session, the Auto & Truck Dealerships company that operates in wider Consumer Cyclical sector, reached to the highest price of $100.90 whereas the lowest price it dropped to was $98.48. The 52-week range on KMX shows that it touched its highest point at $155.98 and its lowest point at $84.37 during that stretch. It currently has a 1-year price target of $112.18. Beta for the stock currently stands at 1.39.

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Price Performance and Earnings:

Stock performance is one of the indicators that investors use to determine whether they will profit from a stock. The price performance of KMX was up-trending over the past week, with a rise of 5.75%, but this was up by 4.15% over a month. Three-month performance surged to 4.98% while six-month performance fell -10.06%. The stock lost -28.56% in the past year, while it has lost -23.37% so far this year. A look at the trailing 12-month EPS for KMX yields 5.89 with Next year EPS estimates of 6.06. For the next quarter, that number is 1.44. This implies an EPS growth rate of 54.10% for this year and 7.77% for next year. EPS is expected to grow by 16.00% annually over the next five years; however, over the past five years, the company experienced an annual growth rate of 16.40%.

Float and Shares Shorts:

At present, 160.30 million KMX shares are outstanding with a float of 158.66 million shares on hand for trading. On Jul 14, 2022, short shares totaled 13.41 million, which was 8.43% higher than short shares on Jun 14, 2022. In addition to Mr. William D. Nash as the firm’s Pres, CEO & Director, Mr. Enrique N. Mayor-Mora serves as its Exec. VP & CFO.

Institutional Ownership:

Through their ownership of 104.95% of KMX’s outstanding shares, institutional investors have majority control over the company. Other institutions hold 55.27% of KMX, in contrast to 48.13% held by mutual funds. Shares owned by individuals account for 3.14%. As the largest shareholder in KMX with 10.62% of the stake, The Vanguard Group, Inc. holds 17,051,790 shares worth 17,051,790. A second-largest stockholder of KMX, Principal Global Investors LLC, holds 9,933,838 shares, controlling over 6.19% of the firm’s shares. BlackRock Fund Advisors is the third largest shareholder in KMX, holding 7,531,997 shares or 4.69% stake. With a 4.18% stake in KMX, the Akre Focus Fund is the largest stakeholder. A total of 6,712,000 shares are owned by the mutual fund manager. The Principal Investors – Mid Cap Fun, which owns about 3.72% of KMX stock, is the second-largest Mutual Fund holder. It holds 5,972,321 shares valued at 540.38 million. Vanguard Total Stock Market Index holds 2.95% of the stake in KMX, owning 4,730,481 shares worth 428.01 million.

An Overview of Recent Financials:

Understanding a company as a customer does not mean you will understand it as an investor. The wise investor uses quantitative research to analyze metrics such as revenue, net income, and earnings. In its fiscal quarter reported on May 30, 2022, KMX reported revenue of $9.31B and operating income of $86.74M. It generated $252.26M net income for the quarter, which came to $966.81M over the last twelve months. The EBITDA in the recently reported quarter was $484.65M and diluted EPS was $1.56. EBITDA for the full year was $1.86B.

Analysts Ratings:

Reading analyst opinions is an effective way to decide where to invest, and there are several opinions available for KMX since 19 analysts follow the stock currently. There are 9 analysts who recommend BUY ratings, while 1 suggest SELL ratings. Of the remaining analysts, 7 believe that the stock is worth HOLDING, 2 give it an OVERWEIGHT rating, and 0 thinks that it’s UNDERWEIGHT. In the same way, a target price assigned to a stock can also reveal much about its potential. With KMX analysts setting a high price target of $146.00 and a low target of $73.00, the average target price over the next 12 months is $109.65. Based on these targets, KMX could surge 46.29% to reach the target high and fall by -26.85% to reach the target low. Reaching the average price target will result in a growth of 9.87% from current levels.

EPS: Estimates vs Actual

It is also common to use earnings estimates to evaluate a firm’s growth potential and to determine trading strategy. KMX will report FY 2023 earnings on 04/06/2023. Analysts have provided yearly estimates in a range of $6.15 being high and $4.96 being low. For KMX, this leads to a yearly average estimate of $5.59. The earnings surprise of a firm occurs when the actual results change from the consensus earnings estimate. CarMax Inc. surprised analysts by $0.05 when it reported $1.56 EPS against a consensus estimate of $1.51. The surprise factor in the prior quarter was -$0.29. Based on analyst estimates, the high estimate for the next quarter is $1.56 and the low estimate is $1.32. The average estimate for the next quarter is thus $1.44.

Summary of Insider Activity:

Insiders traded KMX stock several times over the past three months with 11 Buys and 3 Sells. In these transactions, 34,960 shares were bought while 21,548 shares were sold. The number of buy transactions has increased to 16 while that of sell transactions has risen to 14 over the past year. The total number of shares bought during that period was 58,650 while 60,878 shares were sold.

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