CarMax (KMX:NYS) Fundamental Valuation Report

Fundamental Valuation Report

CarMax(KMX:NYS)

Consumer Cyclical:Auto & Truck Dealerships

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$63.97 (USD) 16/01/2019

Weighted Valuation
$77.97 (USD)

Overall Rating
Undervalued by 21.9%

Valuation Models Analyst Consensus: $83.00 (USD)
(in order of importance) Adjusted Book Value: $70.42 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (KMX:NYS USD)

Price 63.97
Range 62.33 – 64.39
52 week 56.72 – 80.68
Open 63.53
Vol / Avg. 1.92M/2.06M
Mkt cap 10.88B
P/E 16.89
Div/yield 0.00/0.00
EPS 3.60
Shares 170.09M
Beta 1.46

Company Description

CarMax sells, finances, and services used and new cars through a chain of nearly 200 retail stores. It was formed in 1993 as a unit of Circuit City and was spun off into an independent company in late 2002. Used-vehicle sales account for over 84% of revenue, wholesale about 13%, and the remaining portion is composed of extended service plans, and repair. In fiscal 2018, the company retailed and wholesaled 721,512 and 408,509 used vehicles, respectively.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for KMX:NYS

Using a discounted cash flow model we generated an intrinsic value of ($127.64) (USD) for KMX:NYS

Comparables Model

Using similar companies and price based ratios we generated a valuation of $45.03 (USD) for KMX:NYS. We also generated a valuation of $39.29 (USD) using other metrics and comparables.
The comparable companies were AutoNation (AN:NYS), Copart (CPRT:NAS) and Penske Automotive Group (PAG:NYS).

Company KMX:NYS End Date Value
Earnings/Share $4.33 (USD)
Book Value/Share $20.20 (USD)
Sales/Share $100.32 (USD)
Cash Flow/Share $1.27 (USD)
EBITDA/Share $7.35 (USD)
Price Based on Comps Adjustment Factor (%)
$54.26 (USD) 20.8
$62.20 (USD) 36.8
$15.16 (USD) 6.3
($60.05) (USD) 0.0
$72.22 (USD) 45.2
KMX:NYS Ratios Used Average Values AN:NYS CPRT:NAS PAG:NYS
14.49 PE Ratio 12.53 7.27 25.41 4.91
3.11 PB Ratio 3.08 1.23 6.69 1.32
0.63 PS Ratio 2.20 0.15 6.29 0.15
49.37 PCF Ratio 10.48 5.29 21.17 4.97
18.52 EV to EBITDA 9.83 5.83 16.05 7.59

Multiples

Using a multiples approach we generated a valuation of  $87.87 (USD) for KMX:NYS

Company KMX:NYS End Date Value
Earnings/Share $4.33 (USD)
Book Value/Share $20.20 (USD)
Sales/Share $100.32 (USD)
Cash Flow/Share $1.27 (USD)
EBITDA/Share $7.35 (USD)
Price Based on Comps Adjustment Factor
$83.12 (USD) 0
$75.17 (USD) 0
$78.04 (USD) 0
$62.73 (USD) 0
$140.31 (USD) 0
Ratios Ratio Average
PE Ratio 19.20
PB Ratio 3.72
PS Ratio 0.78
PCF Ratio 49.37
EV to EBITDA 19.09

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  KMX:NYS for the last 10 years was  3.68

We ran the Adjusted Book Value for  KMX:NYS and generated a book value of  $19.11 (USD)
By multiplying these we get an adjusted valuation of  $70.42 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for KMX:NYS. The 4 analysts have a concensus valuation for KMX:NYS for 2020 of $83.00 (USD).

KMX:NYS CarMax

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
4 1 0 4.6000 Buy 2019-1-15

Current Price: 63.97 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 4.65 5.03 5.64
# EPS Analysts 5 5 2
Mean Revenue 18,270.40 19,317.90 20,437.60
# Revenue Analysts 4 4 2
Mean Target Price 83.00
Mean Cash Flow 2.92 3.68 2.55
Mean EBITDA 1,335.40 1,434.60 1,549.20
Mean Net Income 821.90 847.90 913.60
Mean Debt Outstanding 13,307.40 13,728.80 13,863.80
Mean Tax Rate 24.40 25.00 25.00
Mean Growth Rate 12.78
Mean Capital Expenditure 305.90 299.60 221.80

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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