Aggressive Growth: CarMax, Inc. (KMX)

CarMax, Inc. (KMX) recently posted its seventh consecutive earnings surprise, sending shares to multi-year highs.

Company Description

CarMax is a national used car retailer known for its no-haggle philosophy that puts customers at ease. The company has 103 locations across the U.S.

Revenues Still Rising

On Sep 22 CarMax reported second-quarter results that showed a 13% increase in net sales, to $2.34 billion. The company said it is especially happy with the comparable store used unit figures. While the figure rose just 4%, it was the toughest comp they have had in quite some time. Wholesale unit sales grew a very solid 20%.

Net income rose $4.9 million, to $107.9 million. Earnings per share came in at 48 cents, beating the Zacks Consensus Estimate by 8 cents. The quarter marked record profits for CarMax and was the seventh consecutive earnings surprise.

Unanimous Revisions

Following the earnings release, analysts raised full-year estimate for both fiscal 2011 and 2012. The Zacks Consensus Estimate for this year is up 15 cents, to $1.60 on 14 upward revisions.

CarMax is expected to earn $1.69 next year, up 17 cents on 15 upward revisions. Given the $1.17 earned in fiscal 2010, the annual growth rates are 37% and 6%, respectively.


Shares of KMX are going for roughly 17 times forward earnings, which isn’t going to turn head, but historically, this is a good value for the stock. In fact, 2010 has the lowest range for the P/E ratio since 2000.

The Chart

KMX surged to the highest level since Jan 2007 on the latest earnings release. Looking at the stochastic share are overbought here, so you may want to wait just a bit before jumping in, but don’t let the historically low valuations slip away.

CARMAX GP (CC) (KMX): Free Stock Analysis Report

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About Bill Wilton 56 Articles

Affiliation: Zacks Investment Research

Bill Wilton is the Growth Stock Strategist for He is also the Editor in charge of the market-beating Zacks Growth Trader service.

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