Frequently in excess of 20%, the return on equity was impressive, illustrating just how lucrative subprime lending - to precarious or barely creditworthy borrowers - could remain despite, or rather thanks to, the risk.

Carmax's growth track record was also impressive, with sales increasing six-fold in twenty years, and earnings per share increasing twelve-fold over the same period. In fact, the group is a notorious "cannibal": for the past ten years, it has been buying back its shares on a massive scale, reducing the number of shares in circulation by 30% over the period.

The market, which had lost all sense of reality during the pandemic, partly as a result of the federal government's measures to support the economy and a shortage of second-hand shares, had pushed the valuation to more than twenty times the 2021 exceptional profit of $7 per share.

This went against the already optimistic forecasts of analysts, who were expecting normalized profits of between $4 and $5 per share. Bad news - the inevitable normalization did take place, but it was even more severe than expected, and in fiscal year 2024 the Group achieved $3 profit per share.

As for the quarterly results published yesterday, they show no sign of a trend reversal - volumes are still down, and earnings per share are down by a third, despite a net interest margin benefiting from rising interest rates. No signs of serial defaults, however, with stable provisions for non-performing loans. This closely watched indicator is considered ideal for taking the pulse of the US economy.

Notably, this month Carmax initiated a strategy of securitizing its loan portfolio. This development, which enables Carmax to free up capital and reduce its risk, is bound to raise questions: when a credit institution starts selling its highly profitable loan portfolios, it's usually because it's beginning to feel the wind turning.

For the past ten years, some observers have been betting on an implosion of the US auto loan sector - so far without success, even if the default rate has recently risen. It's true that those who point the finger at a doubling of auto debt per household over the past fifteen years forget that, including inflation, the absolute debt ratio hasn't actually risen all that much.

In addition to credit risks, there is also the question of a depression in used car prices, as vehicles seized by financial institutions come onto the market. Active on both fronts, Carmax would find itself at a double loss.

Even if the worst is never certain, the objective of a $5 profit per share seems to be slipping away. Profitability has in fact been in structural decline for several years, as the group has had to invest steadily in its digital strategy. In any case, this does not mean that the Group is deviating from its major orientations, as management announced yesterday that it would be stepping up its share buyback program this year.

Despite the economic downturn, this announcement supports market capitalization at a still-high level of twenty-four times expected profit this year.