Is CPRT a good stock to buy?We came across a bullish thesis on Copart, Inc. on Astute Optics - US's Substack. The thesis was published on September 12th, when the stock was trading at $29.95, and CPRT lost 11.95% since then. The decline appears to reflect continued concerns about weaker insurance auction volumes, slowing growth, and pressure on profit margins, reinforced by an analyst downgrade. ca.investing.com In this article, we will summarize the bulls' thesis on CPRT. Copart, Inc.'s share was trading at $26.37 as of October 13th 2026. CPRT's trailing and forward P/E were 18.58 and 17.15 respectively according to Yahoo Finance.
This isn't the first time we see a vehicle auction company pitched as a great investment. Unfortunately, CPRT shares lost 40.82% of their value over the last 12 months. Comparable stocks like RB Global (RBA) lost 16.08% of their value during the same period. Why are auction stocks declining so much and is it really a good time to buy them?
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In February, we published an article about the 13 Best Extremely Profitable Stocks to Invest in According to Hedge Funds and CPRT ranked #10 in that article. Btw, the #1 stock in that list returned 15.27% since then. So, hedge funds were right about their #1 pick but CPRT was a disappointment. This article explains why hedge funds were bullish on CPRT. Before getting into our analysis, let's take a look at the business and why some investors like the stock so much.
Copart, Inc. (NASDAQ:CPRT) provides online auctions and vehicle remarketing services, with particular strength in salvage vehicles sold for insurance carriers. The company combines a proprietary digital auction platform with more than 250 physical locations, connecting insurers and other vehicle sellers with dismantlers, rebuilders, dealers, and exporters around the world. The investment case rests on Copart, Inc. staying a highly profitable market leader while using its planned ACV Auctions deal to grow beyond its insurance-heavy business.
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In fiscal year 2026, revenue barely moved, rising just 0.4% to $4.67 billion, while profits actually shrank: operating income fell 2.6% to $1.65 billion, net income dropped 4.4% to $1.48 billion, and earnings per share slipped 2.5% to $1.55. At around $30.75 a share, the stock now looks considerably cheaper than it did a year ago, even as growth has slowed.
The bullish case rests on Copart, Inc.'s strong position in the salvage vehicle market. As vehicles become more expensive to repair, thanks to costlier electronics, parts, and labor, insurers are more likely to declare them total losses, sending more vehicles through Copart, Inc.'s marketplace. Its large global network of buyers and sellers reinforces that position. The numbers support the quality argument: margins are unusually high, with operating margin near 37% versus a peer median of just 7%, and net margin around 33%. Return on equity stands at nearly 18%. The one weak spot is growth, which at roughly 1% trails the peer median of close to 10%.
Copart, Inc. plans to acquire ACV Auctions Inc. (NASDAQ:ACVA) for $1.9 billion, a move that would push it into dealer-to-dealer wholesale vehicle sales, a new growth channel beyond insurance salvage. Announced on September 10, 2026, the deal values ACV Auctions Inc. at $10.50 per share, about 45% above its prior closing price, and is expected to close by the end of 2026. Copart, Inc. intends to pay entirely from cash on hand, with ACV Auctions Inc. continuing to run independently under its current leadership. The balance sheet supports this comfortably: Copart, Inc. held about $4.2 billion in cash with no debt, and generated roughly $1.2 billion in free cash flow in fiscal 2025.
Wall Street remains optimistic on paper. The average analyst price target of $41 implies about 33% upside from Copart, Inc.'s current price, though the lowest target of $25 points to roughly 19% downside instead. Hitting that $41 target would require earnings well above what analysts currently expect, around $2.24 per share versus a forward estimate near $1.68. Part of that gap reflects how far the stock has already fallen: shares are down about 37% over the past year, mostly because investors are now willing to pay a much lower price for the same level of earnings, with the trailing price-to-earnings ratio dropping from about 31 times to 19 times. Copart, Inc. also trades at 6.1 times sales, well above the peer median of 1.5 times, while ACV Auctions Inc.'s current valuation should be read cautiously, since its share price now mostly reflects the pending buyout offer rather than normal trading.
The biggest risk to this bullish story is weaker insurance-related business. If Copart, Inc.'s market position is as strong as bulls argue, profits should hold up even as claims activity softens, but that hasn't been happening lately. In the fourth quarter of fiscal 2026, revenue grew 2.4% to $1.15 billion, yet operating income fell 10.6% to $368.9 million, net income dropped 17.4% to $327.4 million, and earnings per share sank 14.6% to $0.35. Copart, Inc. still sold more than four million vehicles for the year, but softer insurance claims and shifting insurer behavior weighed on volumes. Rising repair costs may support more total-loss declarations over time, but claims activity can swing sharply in the short run. If insurance-related growth stays weak, dealer, fleet, finance, and international sales will need to carry more of the load, and a successful integration of ACV Auctions Inc. alongside a volume recovery will be key to justifying current analyst targets.
Another risk for the stock is weaker demand from overseas buyers. Copart's global buyer network supports auction prices, but foreign buyers remain sensitive to exchange rates and import costs. A stronger dollar or higher import duties could reduce what they can afford to bid. International buyers purchased 38.2% of U.S. vehicles sold through Copart in fiscal 2026, showing their importance to the marketplace. Lower bids could reduce auction proceeds and the fees tied to vehicle selling prices. That could weaken earnings even if insurance-related volumes recover. In our opinion, this could pressure Copart's price multiples if its global reach fails to sustain strong auction returns.
Hedge fund positioning shows a mixed signal on Copart, Inc. As per our database, 60 hedge funds held Copart, Inc. at the end of the second quarter, up from 57 in the previous quarter. This modest increase suggests institutional investors stayed broadly comfortable with Copart, Inc.'s balance sheet and its ACV Auctions Inc. (NASDAQ:ACVA) growth opportunity despite softer earnings. By comparison, RB Global, Inc. (NYSE:RBA) was held by 37 hedge funds, down from 41, OPENLANE, Inc. (NYSE:OPLN) was held by 45 hedge funds, up from 37, and ACV Auctions Inc. was held by 39 hedge funds, down from 47. OPENLANE, Inc. saw the strongest jump in institutional conviction during the quarter, Copart, Inc. gained modestly, RB Global, Inc. (NYSE:RBA) slipped, and ACV Auctions Inc. (NASDAQ:ACVA) saw the sharpest pullback in hedge fund interest.
Short interest data also paints a fairly mixed picture. About 3.90% of Copart, Inc.'s float is sold short, higher than OPENLANE, Inc. at 2.18% but lower than RB Global, Inc. at 11.77% and ACV Auctions Inc. at 8.43%. This suggests bearish investors are watching Copart, Inc.'s slowing earnings and softer insurance volumes, but sentiment against it remains less negative than for RB Global, Inc. and ACV Auctions Inc.
Valuation Analysis
CPRT's trailing P/E is 18.58x. RB Global, Inc. and OPENLANE, Inc. trade at trailing P/Es of 35.93x and 39.22x, respectively, while ACV Auctions Inc. has no available trailing P/E. CPRT's own trailing P/E was 30.02x on July 31, 2025, putting its current valuation approximately 38% below that level. We believe the current valuation reflects investor concerns about softer insurance-related volumes, declining earnings, and the execution risks surrounding its planned ACV acquisition. However, the discount appears substantial given Copart's continued profitability, although differences in peer debt and accounting limit a direct P/E comparison. Copart, Inc.'s diluted earnings per share declined from $1.59 in fiscal 2025 to $1.55 in fiscal 2026, representing approximately a 2.5% decrease. We believe 18.58 times trailing earnings could offer reasonable value if earnings stabilize and return to modest growth, without requiring a return to its previous 30x multiple to support shareholder gains. If Copart can protect auction margins, recover vehicle volumes, and turn the ACV acquisition into additional profits, the current valuation could offer an attractive entry point despite its near-term earnings and integration risks.
Previously, we covered a bullish thesis on Copart, Inc. (CPRT) by Andvari in May 2025, which highlighted its cash position, debt-free balance sheet, disciplined capital allocation, and insurer relationships. CPRT's stock price has depreciated by approximately 50.88% since our coverage. We believe CPRT could be a good long-term investment, as its discounted valuation offers an attractive entry point if earnings stabilize and return to modest growth.
Copart, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds . While CPRT could offer long-term upside if vehicle volumes recover and the ACV acquisition adds to profits, we believe some AI stocks offer stronger long-term potential, with a high probability of delivering superior returns on a much shorter timeline. If you are looking for an AI stock that is more promising than CPRT and that has 10,000% upside potential, check out our report about this cheapest AI stock .
Disclosure: None.
