Copart’s fiscal 2024 third quarter again showed strong growth and solid profitability, a byproduct of the firm’s wide economic moat enabling share gain and falling used vehicle prices. This increased the insurance industry’s total loss frequency, which means more auction volume for Copart.
We see Copart’s wide moat as safe given minimal competition and an excellent ability to provide a high liquidity marketplace for buyers and sellers.
Bears
Copart’s moat could be weakened should RB Global meaningfully improve IAA following its March 2023 acquisition, but we are not concerned this will happen.
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Based in Dallas, Copart operates an online salvage vehicle auction with operations in 11 countries across North America, Europe, and the Middle East, facilitating over 3.5 million transactions annually. The company utilizes its virtual bidding platform, VB3, to connect vehicle sellers with over 750,000 registered buyers around the world. Buyers primarily consist of vehicle dismantlers, rebuilders, individuals and used vehicle retailers. About 80% of Copart’s vehicle volume is supplied by auto insurance companies holding vehicles deemed a total loss. Copart also offers services such as vehicle transportation, storage, title transfer, and salvage value estimation. The company primarily operates on a consignment basis and collects fees based on the vehicle’s final selling price.