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, decided to focus solely on hard work.
Founded in 1982 by Johnson at the age of 34, Copart started modestly through 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. Shortly thereafter, the acquisition of NER Auction Group allowed it to double its network. Anecdotally, Johnson, who had little appetite for financial socialites, recounts in his biography "Junk to Gold" that while suit-clad bankers were celebrating the IPO, he slipped away to scout a competing junkyard he planned to acquire.
The business model, which has not changed since its inception, is brilliantly simple: Copart auctions off vehicles considered as write-offs, 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 taking 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 has hit a ceiling. Its valuation became stretched, and the first clouds have begun to form. The breaking point arrived in May 2025, with the release of results for the 2024-2025 winter season.
It is important to note that Copart's business depends almost exclusively 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 that was below expectations, weighed on by sluggish sales and rising expenses.
Since then, the stock has struggled to rebound, seemingly on a downward spiral. Between insider share sales and disappointing quarterly releases, the company remains far below its peaks. Nevertheless, the original recipe has not changed and fundamentals remain solid, even though they are losing momentum from 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 noted that, aside from this decline in profitability, Copart's overall management is nearly faultless. The balance sheet is very healthy. Past acquisitions have been largely amortized, long-term debt has completely disappeared since 2024, and free cash flow remains stable, showing no signs of dropping off.
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.
Its war chest has thus grown from just $156m in 2016 to $4.79bn (including marketable securities). While this massive hoarding points to room to improve its 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 have proven 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 caused this? 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 wri ting offvehicles? 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 pocket after a claim. The direct result: to avoid these costs, motorists are forgoing claims for minor and moderate accidents. Consequently, claim volumes are falling for insurers, even though the percentage of vehicles written off remains high.
This trend worries investors, who fear that the flow of vehicles arriving at Copart may dry up permanently as the automotive sector's technological transition appears inexorable.
What does the future hold?
This is where opinions diverge. Yes, the market is highly likely to be less supportive than it once was. However, road accidents and total losses remain significant. Looking at the very long term, while the world is moving towards safer driving, the democratization of autonomous vehicles (should it ever occur) would deal another blow to 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, although remain sufficient to maintain earnings growth.
While Copart's magic formula hasn't changed, its market valuation has significantly deflated. The company currently trades 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 balance sheet prepared to weather turbulence.
Investing in Copart today, however, is a clear bet of an eventual rebound in vehicle volumes from insurers. This is precisely the signal of a restart that 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.
