Valuation
Valuation
The 54% drawdown re-rated Copart's earnings multiple from roughly 38x to 18x while EPS kept rising, so the entire fall is the market repricing growth, not the business missing it. The stock fell from a May 2025 peak of $63.84 to $29.12 at fiscal year-end 2026, down 54.4%; diluted EPS rose from $1.40 in fiscal 2024 to $1.59 in fiscal 2025, fiscal 2026 consensus of $1.58 held essentially flat, and the trailing multiple compressed from about 37x to 18.3x. The counter-fact sits in the same figures: with fiscal 2026 EPS and revenue flat, that lower multiple could be a fair price for slower growth rather than a discount on an unchanged one.
At $29.12 on July 31, 2026 Copart traded at 18.3 times trailing earnings and a 4.3% free-cash-flow yield, a decade low reached almost entirely by multiple compression, not falling profits. Stripping the roughly $4.2 billion cash pile lowers the operating multiple by about one turn, less than the headline suggests, because that cash also earns nearly $179 million a year. The price now capitalizes mid-single-digit perpetual growth against a business that compounded free cash flow above 20% for five years.
A de-rating, not an earnings decline
The stock fell from a May 2025 peak of $63.84 to $29.12 at fiscal year-end 2026, down 54.4% — the sharpest drawdown in the peer set, against a peer median of 35.3%. What did not fall was earnings. Diluted EPS went from $1.40 in fiscal 2024 to $1.59 in fiscal 2025 [1], and consensus for fiscal 2026 sits at $1.58, essentially flat. The entire move is the multiple.
Source: fiscal year-end closing prices and reported diluted EPS, FY2021–FY2025; FY2026 point uses the July 31 2026 close of $29.12 over consensus FY2026 EPS of $1.58 [2]. EPS reflects the two 2-for-1 splits.
The multiple lived in the 28–38x band from fiscal 2021 through fiscal 2025 and briefly touched the low 40s at the 2025 peak. At 18.4x it now sits roughly two-fifths below its own five-year average. The re-rating is the market applying a lower growth assumption to the same toll — the direct valuation echo of the flat fiscal 2026 revenue and the volume-versus-price split traced in Volume and Price.
The headline multiples
Price (Jul 31 2026)
P/E (trailing)
Price / FCF
FCF Yield
Source: market capitalization of $28.47B (July 31 2026) over FY2025 net income attributable to Copart of $1,552.4M [3] and FY2025 free cash flow of $1.23B (operating cash flow $1,799.8M less capex $569.0M) [4].
Trailing free cash flow of $1.23 billion against a $28.47 billion market capitalization is a 4.3% yield [5]; there is no dividend to add to it. That number is cheap against Copart's own record but not against its peers. Among the salvage and remarketing names, Copart's 4.3% yield sits below the 5.4% peer median — the auction platform still carries the group's richest cash multiple even after halving.
Source: trailing free-cash-flow yields, FY2025, per reported financials; OPENLANE, LKQ and CarMax are not FCF-yield comparable and are omitted.
The read is not that Copart is expensive — 18x a fortress-balance-sheet compounder is not a demanding price. It is that the low-yield, high-multiple positioning within its own group has survived the drawdown. A skeptic holds up the 5.4% peer median and a plain ~4% Treasury bill and asks what the extra half-point of yield elsewhere, at lower business quality, is worth.
The cash adjustment, sized honestly
Copart carries roughly $4.2 billion of cash and Treasury bills against near-zero debt as of April 30, 2026 ($3,354.1 million cash plus $845.6 million held-to-maturity) [6], down from $4.79 billion a year earlier as the fiscal 2026 buybacks drew it down (Capital Allocation). Netting that against the market capitalization gives an enterprise value near $24.3 billion, and against fiscal 2025 operating income of $1,696.7 million [7] that is 14.3 times EBIT — visibly below the 18x headline P/E.
That gap is real but smaller than the EBIT figure alone implies, and the reason is worth stating plainly. The cash is not idle in the income statement: it threw off $178.9 million of net interest income in fiscal 2025, about a tenth of net income [8]. A clean enterprise-value comparison must strip both the cash and the earnings it generates. Doing so — enterprise value of $24.3 billion over operating earnings of about $1.39 billion (net income less after-tax interest income) — leaves the operating business at roughly 17.5 times, only about one turn below the 18.3x headline.
Source: market cap $28.47B (July 31 2026); net cash of $4.20B per the Q3 FY2026 balance sheet [9].
The distinction matters for how the cash question from the through-line resolves in a valuation. On EBIT, the balance sheet makes the operating engine look markedly cheaper; on earnings, once the interest income is removed with the cash, the discount narrows to a single turn. The cash lowers the price of the operating business, but not dramatically — it is a modest tailwind to value, not a hidden second business.
What the price implies
Stating the price as arithmetic rather than narrative: at a 4.3% starting free-cash-flow yield, a buyer requiring a 10% total return is paying for about 5.7% perpetual free-cash-flow growth; at a 9% required return, about 4.7%. Copart grew free cash flow at a 23.5% compound rate from fiscal 2021 to fiscal 2025 [10]. The multiple now embeds a deceleration to roughly a quarter of that pace.
Source: derived from a Gordon-growth identity (free-cash-flow yield equals required return less perpetual growth) on the 4.3% trailing FCF yield.
The two sides of that arithmetic are genuinely open. The case that the price is too conservative rests on the secular tap the report has already documented — total-loss frequency rising from 15.6% in 2015 to 23.1% in 2025 and an aging vehicle fleet keeping the unit funnel open (Volume and Price), a wide operating-margin moat (The Moat), and a share count now shrinking after the fiscal 2026 buyback. Sell-side coverage agrees: the mean analyst target is $40.30 and the median $41.00, roughly 38% and 41% above the $29.12 price, implying a re-rating back toward 24x fiscal 2027 consensus EPS of $1.68. The case that the price is right rests on the flat fiscal 2026 the last chapter documented — soft U.S. insurance units, held up only by record auction prices — and the possibility that some assignment share is being ceded to IAA. If unit growth has structurally slowed to low single digits, then 18x flat earnings and a below-peer cash yield is a fair, not cheap, price for a maturing franchise.
The valuation is most sensitive to which reading of fiscal 2026 holds: an industry claim-count cycle that reverses, or a permanent step-down in unit growth. The first makes ~18x and a 4.3% yield look like a decade-low entry point on a proven compounder; the second makes it an ordinary price for ordinary growth. The evidence that most moves that reading is the ex-catastrophe U.S. insurance unit trend in the fiscal 2026 10-K, due around September 2026.
The market has repriced Copart from a high-growth compounder to a steady-growth one, and the drawdown has taken the multiple most of the way there without touching the earnings. That is a more attractive setup than the price action suggests — the business is unimpaired and the balance sheet is a fortress — but it is not the deep-value case a 54% fall might imply, because the operating business is only about one turn cheaper for the cash, still carries the richest cash multiple in its group, and needs the unit engine to reaccelerate for the sell-side's re-rating to land. The strongest fact against the constructive read is the below-peer 4.3% free-cash-flow yield reached with volumes already soft; what would change the read is the ex-catastrophe unit line turning positive, which would validate the growth the multiple has stopped paying for.