Margins at a high, shares at a low, CEO back after two years. What's going on with Copart
For twenty years, Copart was considered one of the best businesses in America: a debt-free duopoly, hundreds of company-owned lots, and a gross margin above 45%. Since November 2024, the stock has nevertheless lost half its value, at a time when margins are rising and the balance sheet is the strongest in the company's history.
Key points
Copart shares are down 51% from November 2024, even though gross margin recently rose
While Copart's U.S. insurance volumes fell 4.2%, rival IAA reports volume growth of 11%
The market pays 19.6 times earnings for the company - versus a five-year median around 34
At the end of June, CEO Jeff Liaw announced his departure, Jay Adair returned, and shares fell 8% in a week
The company is also facing a U.S. Department of Justice investigation into money laundering
There is one category of companies the market loves most: monopolistic or duopolistic businesses where the customer has nowhere to go, margins haven't moved down in years, and cash flows in on its own. Copart $CPRT was a textbook example for twenty years. The company auctions wrecked cars for insurers, owns hundreds of lots across the United States, has no debt, and its return on invested capital is around 30%.
Since November 2024, when the stock climbed to a record high of $64.38, something else has been true. The price fell to $31.51, market value shrank from roughly $63 billion to $29.2 billion, and this year alone the stock is down 19.5%. Over the last twelve months it lost a third of its value while the U.S. index added more than twenty percent.
What's interesting is what happened to operations during that time. Almost nothing bad. In the latest reported quarter, ended April 30, 2026, gross margin rose 71 basis points to 46.3%, revenue beat estimates, and average selling price for U.S. insurance vehicles was the highest ever for a third fiscal quarter. The company holds $4.1 billion in net cash and no debt. Operationally, this doesn't look like a company whose value should be cut in half.
But Copart is selling fewer and fewer cars. U.S. insurance volumes fell 4.2% year over year. And in the same quarter, its main competitor, the IAA division under Canadian $RBA.TO , reported volume growth of 11%, citing "net market share gains."
This is the whole dispute in one sentence. Copart has its best margins in three years and at the same time is seeing fewer vehicles. Are volumes falling because there are fewer accidents in America and fewer insured drivers—a cyclical reason that will eventually pass? Or because the duopoly on which the entire investment thesis rested has stopped working, as the second player woke up and started undercutting on price? The answer to this question determines whether today's 19 times earnings is a gift or the right price for a company that no longer grows.