We came across a bullish thesis on Copart, Inc. (CPRT) on Substack by Bulls On Parade. In this article, we will summarize the bulls’ thesis on CPRT. Copart, Inc. (CPRT)'s share was trading at $61.04 as of April 23^rd. CPRT’s trailing and forward P/E were 40.97 and 34.25 respectively according to Yahoo Finance.

A busy car auction being held at a leading car dealership, buyers and sellers engaging in active bidding.

Copart, Inc. (CPRT) is a textbook example of a high-quality compounder that has quietly delivered astronomical returns, transforming a modest salvage yard into a global technology-driven vehicle remarketing juggernaut. With a market cap north of $50 billion in early 2025, it stands as one of the top-performing stocks over the past two decades, a feat few would expect from a business rooted in the junkyard industry. The company’s journey began in 1982 under founder Willis Johnson and evolved through consistent strategic pivots, most notably its early embrace of technology. By 2003, Copart had migrated fully to an online auction model powered by its proprietary VB3 platform. This shift catalyzed its growth, positioning it as the undisputed leader in online salvage vehicle auctions. Today, Copart operates across 11 countries, transacting over 3.5 million vehicles annually, and catering to a diverse customer base—from insurance companies and banks to exporters and dismantlers.

The company’s consignment model, which constitutes 86% of its revenue, enables high-margin, asset-light operations. Insurance firms account for roughly 80% of vehicle volume, leveraging Copart’s efficiency in disposing of totaled cars. This creates a network effect where scale attracts more sellers, which in turn draws more buyers, reinforcing Copart’s dominance in a near-duopoly with Insurance Auto Auctions (IAA). Innovation is central to Copart’s edge, as seen in tools like Copart 360 for detailed imaging, IntelliSeller for auction optimization, and Title Express, which streamlines salvage title processing—each strengthening its competitive moat. Geographic expansion, both within North America and internationally, has unlocked new markets, while diversification into fleet sales and non-salvage vehicles adds incremental revenue streams and resilience.

What separates Copart further is its capital allocation discipline. The company generates over $1 billion in annual free cash flow and reinvests wisely. A significant portion of this capital goes toward land acquisition for its 150+ salvage yards, ensuring long-term scalability and inflation protection. Owning these urban-adjacent assets creates high barriers to entry. Copart also leads in technology investments that enhance platform stickiness, while maintaining a pristine balance sheet—holding $3.8 billion in cash against a mere $119.4 million in debt, translating to a virtually unleveraged capital structure. Though Copart doesn’t pay dividends, occasional buybacks and selective acquisitions, like Purple Wave for construction and fleet vehicles, signal thoughtful reinvestment into growth verticals. These capital decisions are reflected in the company’s financial metrics, boasting a 19.19% ROE and 13.26% ROIC, rare among asset-light platform businesses.

Copart’s Q2 FY2025 results reaffirm its strength. Revenue climbed 14% year-over-year to $1.13 billion, led by a 15% rise in consignment services and 8.6% growth in vehicle sales. EPS surged 21.2% to $0.40, exceeding consensus estimates. Although the operating margin dipped slightly due to cost inflation, gross profit and operating income still grew double digits, highlighting leverage within the model. Notably, the company’s high-margin service revenue is growing faster than its lower-margin sales, indicating an improving business mix. Management pointed to stable demand and the success of Title Express as key contributors, and buyers continue to be drawn to Copart’s highly liquid and transparent marketplace, especially during economic uncertainty when used car demand tends to rise.

Valuation-wise, Copart trades at a trailing P/E of ~38 and a forward P/E of 34, reflecting its premium status among commercial service peers. Its EV/EBITDA of 27.77x and P/FCF of 50.01x suggest it’s not cheap, but the price is arguably justified by its capital-light model, scale, and sticky customer base. Analyst targets imply 13–18% upside, with the bull case projecting shares reaching $65–$70 if Copart sustains 10–11% EPS and revenue growth. Even a base case sees a potential 7–8% annual return over the next two years, in line with or slightly above the broader market.

In essence, Copart offers a unique blend of consistency, capital discipline, and strategic agility. While the stock commands a premium, its unmatched network, global scale, and technological edge provide ample justification. With a fortress balance sheet and a platform model that grows earnings faster than revenue, Copart stands as a quiet compounder with robust long-term upside.

Copart, Inc. (CPRT) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 53 hedge fund portfolios held CPRT at the end of the fourth quarter which was 48 in the previous quarter. While we acknowledge the risk and potential of CPRT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CPRT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.