Copart (CPRT): 16% ROE, $1.27B free cash flow, and 17.6x earnings under a US salvage-volume test

Copart, Inc. (NASDAQ: CPRT) auctions the cars that insurers have written off. It is this week's featured pick, and it cleared the channel's three hard gates on the fiscal year it closed on July 31, 2026: reported return on equity stayed above 15% in each of the last five years, free cash flow was positive in each of them, and the shares now trade below the company's own five-year range on every multiple this article tracks. 12

The shares closed at $27.32 on Friday, October 9, 2026. With 926.33 million shares outstanding, that is a market value of $25.31 billion and an enterprise value of $20.91 billion. 34

The price sits 39.2% below where the stock traded a year earlier, and the market value is 41.8% below what it carried at the July 31, 2025 fiscal year end. 13

A fall that size, against a business whose net income slipped only 4.4%, needs explaining, and three arguments carry most of the weight. The first is that revenue growth stopped: fiscal 2026 revenue rose 0.4%, and service revenue in the United States, which is the fee Copart charges insurers to sell a car, fell 1.8%. 5 The second is that costs kept climbing while revenue stood still, so the operating margin narrowed and the July quarter's net income fell 17.4%. The third is that Copart has agreed to spend $1.9 billion of its cash on ACV Auctions Inc., a listed digital auction platform that lost $63.15 million over the last twelve months, which changes what kind of company this becomes. 67

Each argument can be checked against the accounts. What follows sets out what Copart sells, what the three gates measure and how they were read, what changed inside the fiscal year, and which numbers would settle the argument.

The price snapshot is the October 9, 2026 close of $27.32, on 926.33 million shares outstanding. 3

Copart reports on a fiscal year running from August 1 to July 31, so fiscal 2026 ended on July 31, 2026 and the three most recent completed fiscal years are fiscal 2024, 2025 and 2026. 4 The latest reported period is the quarter that ended on the same date, published on September 10, 2026. 5

That calendar matters for how the screen below should be read. Copart's year ends in July, so a screen built on calendar-year windows places the company on an approximate match. Every year of the gate in this article is read instead from Copart's own reported ratio row for its own fiscal year.

Return on equity below is the reported ROE row in Copart's historical ratio table, which divides net income by average shareholders' equity for the year. 1 Dividing by equity at the July 31 year end instead gives the lower figures shown beside it in the gate table.

Free cash flow means net cash provided by operating activities less purchases of property and equipment, the two lines Copart reports in its annual results. 5

The four multiples are P/E on diluted earnings per share, P/B on book value per share, P/FCF as market capitalisation divided by free cash flow, and EV/EBITDA as published. Historical multiples are the values recorded at each July 31 fiscal year end from 2022 to 2026. 13

The peer set is RB Global, Inc. (NYSE: RBA), which owns Insurance Auto Auctions and is Copart's largest salvage competitor; OPENLANE, Inc. (NYSE: OPLN), a listed digital vehicle auction platform; and ACV Auctions Inc. (NYSE: ACVA), the dealer-to-dealer platform Copart has agreed to buy. 4 The three serve as valuation anchors only: RB Global earns 8.07% on equity and OPENLANE 11.15%, both below this channel's 15% floor, and ACV Auctions lost money over the last twelve months, which rules the three out as alternative candidates. 789

This week's candidate search ran against the Securities and Exchange Commission's XBRL frames interface, which publishes every reported value of one accounting tag for one period across all filers. Pulling net income, shareholders' equity, operating cash flow and capital expenditures for 2023, 2024 and 2025 returned 2,975 companies that carried all four items across those periods, of which 284 cleared a 15% return-on-equity floor in every year together with positive free cash flow in every year. 10111213

The route's reach is the set of SEC filers that tagged those four items inside the annual frames. Each frame holds only the facts whose reported period matches its window, so a company on a fiscal calendar outside that window enters the shortlist on an approximate match. Copart reports on such a calendar and was then verified year by year against its own annual report, which is what the gate tables below use. 4

The gate covers the three most recent completed years, fiscal 2024 through 2026, and the two earlier rows show a five-year band that never fell below 20%.

The number worth reading closely is the direction. Copart's return on equity has declined every year for five years, from 26.74% in fiscal 2022 to 16.16% in fiscal 2026. 1 The cause sits mostly in the denominator: shareholders' equity rose from $4.63 billion at July 31, 2022 to $9.11 billion four years later, while net income grew from $1.09 billion to $1.48 billion over the same span. 14

Equity compounding faster than profit is what happens when a company keeps its earnings and buys back little. Copart's repurchases paused through fiscal 2024 and 2025, while the ratio of profit to invested capital stayed high: return on invested capital was 28.38% over the last twelve months. 34

Free cash flow has risen every year for five years, including the year in which revenue stopped growing. The fiscal 2026 figure is $1,604.5 million of operating cash flow less $337.4 million of capital expenditure, and capital spending fell 40.7% from the prior year's $569.0 million as the pace of yard building slowed. 5

The valuation gate clears when current P/E, P/B, P/FCF and EV/EBITDA all sit below Copart's own five-year medians and when at least two of the four sit at or below the relevant peer median.

Both halves of the gate clear, and the own-history half clears by the widest margin this channel has recorded: on all four measures the current value sits below the entire five-year range, not merely below the median. The forward P/E is 16.85x and the free cash flow yield is 5.01%. 3

Two readings inside that table deserve stating plainly. RB Global's trailing P/E of 37.00x sits against a forward P/E of 18.33x, because trailing earnings there are depressed; a single trailing multiple compares poorly between the two companies, which is why the ratio is shown but carries less weight than the enterprise measures. 8 And the discount came with the decline: the market value has fallen in two of the last three fiscal years, so the multiples have fallen along with the price. 1

Copart runs the marketplace that stands between an insurance company and a written-off car.

When a car is damaged, the insurer's adjuster estimates the repair cost and the vehicle's pre-accident value. If the repair costs more than that value less the car's salvage worth, the insurer classifies the vehicle as a total loss, settles with its customer, takes title and hands the car to a remarketer. 4

Copart is one of the remarketers. It stores the car in one of its yards, photographs and lists it, and runs it through an online auction to a registered buyer, most often a dismantler, a rebuilder, a used-car dealer or an exporter. 4

The company earns fees: a listing fee, a selling fee that can be a percentage of the sale price or a flat amount per vehicle, a transport fee, a title-processing fee, a storage fee, a loading fee and a bidding fee. 4 In most markets, including the United States, Copart acts as the insurer's agent and books only its fees as revenue, which is why $4.67 billion of revenue sits on 4 million vehicles sold in the last year. 5

Insurance companies supplied 79% of the vehicles Copart processed in fiscal 2026, down from 81% in each of the two prior years. 4

The rest of the supply comes from dealers, finance companies, rental fleets, charities and individuals. Copart's largest single customer stayed below 10% of consolidated revenue, so the concentration sits in the seller type rather than in one account. 4

The demand is global. Roughly a million registered members in more than 185 countries buy through the platform, and 38.2% of the United States units sold in fiscal 2026 went to members outside the country, who paid 45.8% of the gross transaction value. 4

The physical footprint is the barrier to entry: 250-plus locations in 11 countries, with land carried at $2,501 million and buildings at $1,875 million on the July 31, 2026 balance sheet. 14 Yards take land, zoning, permits and neighbours that will accept wrecked cars, and Copart added two facilities in Brazil and seven in the United States during fiscal 2026. 5

Copart names its principal competitors as RB Global and its subsidiary Insurance Auto Auctions, Carvana, Openlane, Manheim and ACV Auctions. It also names the risk that insurers bypass the auction houses entirely: LKQ Corporation, the largest United States dismantler, and groups of regional dismantlers buy salvage vehicles directly from carriers. 4

Four years of roughly 10% annual revenue growth ended in fiscal 2026. Diluted earnings per share compounded at about 8% a year from $1.13 to $1.59 between fiscal 2022 and fiscal 2025, then fell 2.5% to $1.55. 2

Inside the flat year, the two geographic segments moved in opposite directions. United States service revenue fell 1.8% to $3,388.3 million while international service revenue rose 12.4% to $581.2 million, and United States operating income fell 4.2% to $1,419.0 million while international operating income rose 8.2% to $233.6 million. 5

The July quarter was the weakest of the year. Revenue rose 2.4% to $1,152.4 million, but facility operations cost rose 8.3% to $506.8 million and general and administrative cost rose 15.9% to $112.5 million. 5

Gross profit fell 5.5% to $481.4 million, operating income fell 10.6% to $368.9 million, and net interest income fell 20.5% to $39.6 million as the cash pile was drawn down. 5

The operating margin for the quarter came in at 32.0%, against 36.7% a year earlier, and the full-year margin narrowed to 35.4% from 36.5%. 5

At July 31, 2026 Copart held $1,907.9 million of cash and restricted cash plus $2,581.9 million of held-to-maturity investments. Total debt was $88.4 million and consisted entirely of lease liabilities, so net cash stood at $4,401 million, or $4.75 a share. 35

Shareholders' equity was $9,097 million, of which $511.3 million is goodwill and $88.8 million other intangibles, and the current ratio was 7.91. 314

Copart's capital return runs through buybacks alone, and its last stock split was a two-for-one in August 2023. 3 In fiscal 2026 the company bought back 43,433,164 shares at an average price of $37.63, spending $1.63 billion, after buying back nothing in the two prior fiscal years. It has 282 million shares still authorised under the programme. 4

That average purchase price is 37.7% above the October 9 close of $27.32, which tells the reader something the programme itself cannot: the buyback was sized at a valuation the market has since refuted. 34

The larger capital decision came on September 10, 2026, when Copart and ACV Auctions signed a merger agreement under which Copart will acquire every ACV share for $10.50 in cash, an equity value of about $1.9 billion, through a tender offer followed by a merger. The deal carries no financing condition, needs the antitrust waiting period to expire and a majority of ACV's shares to be tendered, and Copart expects it to close by the end of the calendar year. ACV will run as a wholly owned subsidiary. 6

ACV is a smaller, faster-growing and unprofitable business: $801.34 million of revenue over the last twelve months, a net loss of $63.15 million, free cash flow of $29.11 million, and $389.89 million of book equity. 7 The $1.9 billion price is therefore about 2.4 times trailing revenue, and paying it in cash leaves Copart with roughly $2.5 billion of the $4.49 billion it held at July 31.

Leadership changed alongside the strategy. On June 29, 2026 the board appointed A. Jayson Adair, then executive chairman and a company co-founder, as chief executive effective July 31, 2026, succeeding Jeffrey Liaw, who stepped down from the role and from the board and moved into a senior advisory role through July 31, 2027. The filing notes that Adair is the son-in-law of Willis J. Johnson, the company's chairman. 15

The United States volume argument. Insurance carriers supply 79% of Copart's vehicles, and United States service revenue fell 1.8% in fiscal 2026 while international service revenue rose 12.4%. 5 Whether that is a cyclical pause or a shrinking market is the question the price is asking, and the accounts settle it only over the next two quarters. The mechanism to watch is supply. A car becomes salvage when repair cost exceeds pre-accident value less salvage worth, and modern cars with sensors, cameras and crumple zones cost more to repair, which pushes vehicles toward write-off. 4 A second year of falling United States service revenue would move that reading from cyclical to structural.

The unit-economics argument. Copart added nine facilities in fiscal 2026 while its United States service revenue was falling, so cost arrived ahead of the volume it was built for. 5 The quarterly test is simple: facility operations grew 8.3% against revenue growth of 2.4%, and any quarter in which facility-operations growth falls below revenue growth puts the margin back on the right side of the equation.

The ACV argument. Buying ACV takes Copart into dealer wholesale remarketing, the part of the market its competitors already occupy, and it does so at 2.4 times trailing revenue for a business that lost $63.15 million over the last twelve months. 67 It also converts a large part of a net cash position into an operating business with its own costs, and it reduces the interest income that contributed $181.9 million before tax in fiscal 2026. 5 The test runs for two years: ACV's revenue growth and cash use as a subsidiary, and whether Copart can lift ACV's low margins with the yard network rather than absorb them.

United States salvage supply. A second consecutive year of falling United States service revenue, reported in the fiscal 2027 first quarter on November 19, 2026, would confirm that the decline in Copart's largest market is structural. 3

Cost de-leverage. Facility operations and general and administrative cost together were rising at a pace roughly triple revenue growth in the July quarter; two more quarters of that pattern push the operating margin below 33%. 5

Seller concentration. Four fifths of the supply comes from insurance companies, so a single large carrier moving its salvage disposition in-house, or shifting share to RB Global, OPENLANE or ACV's platform, hits volume across every yard. The trigger is any disclosed loss of a remarketing contract or a fifth consecutive year of decline in the insurance share of vehicles processed, which has already slipped from 81% to 79%. 4

Used-vehicle prices. Part of the selling fee is a percentage of the sale price, so falling used-vehicle values cut revenue per vehicle and can shrink revenue while units hold. The trigger is two consecutive quarters in which service revenue falls while vehicle-sales revenue rises; those two lines already diverged in fiscal 2026. 4

The ACV purchase and its financing. A $1.9 billion cash outlay against a subsidiary that lost $63.15 million over twelve months, with the antitrust waiting period still to clear; the deal can be terminated, with ACV owing $57.7 million and Copart owing $115.3 million under the stated circumstances. 6

Capital allocation at the wrong price. The company repurchased 43.4 million shares in fiscal 2026 at an average of $37.63, 37.7% above the current price. Further buybacks above the present multiple, or a second acquisition at a similar premium to tangible value, would spend the cash advantage the balance sheet still provides. 4

The ACV Auctions tender offer is the nearest event: a $10.50 cash price, no financing condition, and closing targeted for the end of the calendar year. 6

Copart's fiscal 2027 first quarter is estimated for November 19, 2026, after the market close, and it is the first full quarter reported under the returning chief executive. 3 That release carries the first reading on whether United States service revenue has turned, and on whether the cost base added during fiscal 2026 is producing units.

The buyback is the third lever. With 282 million shares authorised against 926.33 million outstanding, and the shares near a 52-week low against a $39.00 average analyst price target and a 12-analyst Buy consensus, the company can keep shrinking the share count while the multiple is depressed. 34

All three gates pass on reported figures. Return on equity held above 15% in each of the last five fiscal years on either equity base. Free cash flow rose every year for five years and reached $1,267.1 million. On valuation, all four multiples sit below Copart's entire five-year range and at or below the peer median where a peer figure exists, which is a full pass.

Those gates test the quality and the price of past cash flows. The new strategy sits outside them, and three facts matter just as much: revenue growth has stopped in the company's largest market, the strategy is new, and the chief executive took the role on July 31, 2026. A reader who wants a candidate whose growth is intact and whose cash generation has been proven will find only the second half of that in this issue. The two numbers that carry the decision are United States service revenue and the completion of the ACV purchase.