Why Copart's shares fell today after releasing results

Key Points

• Copart exceeded earnings expectations but did not reach the expected sales last night.
• Copart's free cash flow is not up to par with its reported net income.
• 10 stocks we like more than Copart ›

Copart (NASDAQ: CPRT) shares, which manages online auctions for cars nearing the end of their useful life, including spare parts, fell 4.1% by 2 p.m. ET on Friday despite the company reporting better-than-expected earnings in its fiscal report for the fourth quarter of 2025 last night.

Before the publication, analysts forecasted that Copart would earn $0.36 per share with sales of $1.14 billion for the quarter ended July 31. The company actually earned $0.41 per share, although sales were only $1.13 billion.

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Q4 Results of Copart

These numbers were not bad at all. Copart increased its sales by a solid 5% year-over-year, while its profits rose by 24%. However, in the context of a strong fiscal year 2025, the sales figure may have disappointed investors.

Total sales growth for the full year approached 10%, causing the growth rate for Q4 to be cut in half. On the positive side, full-year earnings —$1.59 per share— grew only 14% compared to fiscal year 2024. Q4 profit growth was much stronger than that seen earlier in the year.

Is it worth buying shares of Copart?

Even so, it is hard to argue that Copart's shares are a good buy right now. With a price of 33 times earnings, the annual growth rate of 14% seems too slow to justify its valuation. Worse still, the company's free cash flow is only $1.2 billion, approximately 20% less than the reported earnings.

Valued by free cash flow, it means that Copart is selling at a multiple close to 40x. Even if Copart could maintain the growth rate seen in Q4, it would be expensive. But in reality, most analysts following the stock agree that Copart's long-term growth rate will be closer to what we saw during the rest of fiscal year 2025, approximately 13%.

At its current price, Copart simply costs too much.

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Disclaimer: For informational purposes only. Past performance is not indicative of future results.