This stockmarket success story, one of the greatest in American history, is credited to Willis Johnson. A Vietnam War veteran and Purple Heart recipient, Johnson returned home without a college degree and, amidst an anti-war climate, chose to focus entirely on his work.
Founded in 1982 by Johnson at the age of 34, Copart began modestly with loans and personal savings, far removed from any initial ambitions of fortune or an IPO. By the early 1990s, the company still operated only four sites, before adding eight more in 1994.
That year marked a definitive turning point: the group went public to raise capital and acquire North Texas Salvage Pool, the largest salvage seller in the US. This was followed by the acquisition of NER Auction Group, which doubled its network. Anecdotally, Johnson, who had little appetite for financial socialites, recounts in his biography "Junk to Gold" that while suit-clad bankers celebrated the IPO, he slipped away to scout a competitor's junkyard he planned to acquire.
The business model, unchanged since its inception, is astoundingly simple: Copart auctions vehicles considered as written off, primarily sourced from insurance companies. Its true strength lies in a significant nuance: the company does not own the vehicles. It orchestrates storage, listing and delivery, while collecting a commission on every transaction.
This winning formula has propelled the group's market success. Driven by international expansion, Copart now operates 275 sites across 11 countries, offering over half a million vehicles daily.
2025: The Onset of the Storm
The narrative seemed idyllic. However, after a market ascent comparable to Apple's, the group hit a ceiling. Its valuation became stretched, and clouds began to gather. The breaking point arrived in May 2025, with the release of the winter 2024-2025 results.
It is important to note that Copart's business almost exclusively depends on the flow of vehicles sent by insurers: if supply dries up, performance collapses. While winter is traditionally the most profitable period due to higher accident rates, and the severity of the 2024-2025 season suggested a record-breaking year, the company disappointed Wall Street. It reported net income below expectations, weighed on by sluggish sales and rising expenses.
Since then, the stock has struggled to rebound, on a downward spiral. Between insider selling and disappointing quarterly releases, the company remains far from its peaks. Nevertheless, the original recipe has not changed and fundamentals remain solid, even though they are losing momentum compared to past performances.
Copart's resilience during the Covid crisis illustrates the robustness of its profile, with revenue and net income showing almost constant growth without major dips. The real point of vigilance now concerns margins. Indeed, its exceptional operating profitability, which once peaked at 42%, was the stock's primary strength. Recently, this profitability has eroded and is struggling to return to its highs - a retreat fortunately offset by top-line growth that preserves convincing net income year after year.
It should be acknowledged: aside from this decline in profitability, Copart's overall management is nearly flawless. The balance sheet is very healthy. Past acquisitions have largely been amortized, long-term debt has completely disappeared since 2024, and free cash flow remains stable, showing no signs of drying out.
The real friction point is more of a "rich man's problem": the chronic underutilization of this capital. Copart pays no dividend and, despite regular share buyback programs, its cash reserves are accumulating at a spectacular rate.
The war chest has thus grown from $156m in 2016 to $4.79bn (including marketable securities). While this massive hoarding points to room for improvement in capital allocation, it is far from an immediate danger. On the contrary, it provides the group with an exceptional safety cushion for the future.
Why is the stock struggling to rebound?
Good news is overdue. While financial results occasionally show slight increases, they are insufficient to reassure a skeptical market. Added to this is a powerful wave of profit-taking: once a "darling" of American investors, Copart is now suffering from their divestment following disappointing quarterly prints.
The primary headwind lies in the vehicle supply crisis. Once thought to be transitory, it now appears to be structural. What's the cause? Has Copart lost its status as the preferred partner for insurers? No - the platform maintains its undisputed leadership. Are insurance companies encouraging more repairs rather than totaling vehicles? Not at all; the dynamics remain unchanged on that front.
Two factors explain this situation. First, the modernization of the car fleet: new models integrate more safety technology to avoid collisions. Second, the surge in auto insurance premiums. Driven by the cost of repairing these high-tech vehicles, bills are climbing. Restoring a modern hybrid bristling with sensors is far more expensive than a 2000s sedan. Paradoxically, this also leads to vehicles being written off much sooner.
To absorb this financial shock, the only option for households is to accept higher deductibles - the amount the driver pays out of his/her pocket after a claim. The direct result: to avoid these costs, motorists are forgoing claims for small and medium fender-benders. Claim volumes are thus falling at insurers, even though the percentage of vehicles sent to salvage remains high.
This trend worries investors. They fear that the flow of vehicles arriving at Copart may dry up permanently as the automotive sector's technological transition seems inexorable.
What does the future hold?
This is where opinions diverge. Yes, the market is highly likely to be less buoyant than it once was. However, road accidents and total losses still represent significant volumes. Looking at the very long term, while the world is moving towards safer driving, the democratization of autonomous vehicles (should it ever occur) would mark a new blow for the company. Furthermore, as long as immense storage and processing infrastructures operate below capacity, costs per vehicle will mechanically compress margins. Regardless, in the medium term, the dynamics remain supportive for Copart's operations. Volumes have certainly decreased but remain sufficient to maintain earnings growth.
While Copart's magic formula hasn't changed, its market valuation has significantly deflated. The company's stock is currently trading at a P/E of 21.1x, well below its historical average, and a level expected to continue easing in the coming years. The stock thus appears "on sale" for a company with intact fundamentals, a proven track record, and a cash position ready to weather any turbulence.
Investing in Copart today, however, amounts to a clear bet: that of an eventual rebound in vehicle volumes from insurers. This is precisely the restart signal investors are waiting for. Consequently, the group's upcoming financial releases, as well as the overall health of the auto insurance sector, will be crucial indicators to monitor closely.
