I’ll say one thing for junked-car salvager Copart (NASDAQ: CPRT): It doesn’t waste words. In a press release last night that topped out at 169 words (a third of which were just telling investors how to tune in for its earnings conference call), Copart efficiently explained to investors how it met analyst forecasts for fiscal Q1 2025 earnings and beat expectations for revenues.

Copart stock is up 8.9% through 10:30 a.m. ET in response.

Copart Q1 earnings

Copart grew its revenues 12% year over year in Q1 to $1.15 billion, about $50 million more than Wall Street’s forecast. Revenue from vehicle sales was basically flat year over year at $160.5 million. Copart got all its growth from services revenue instead, which climbed 15% to $986.3 million.

Net profits rose only 9%, to $0.37 per share, but that was enough to match analyst expectations.

Turning to free cash flow, the company generated only $245.5 million in the quarter — roughly $0.68 in real cash profits for every $1 of reported “net income.” That’s not a great ratio. On the plus side, free cash flow did grow much faster than net income in Q1, up 15% from fiscal Q1 2024.

Is Copart stock a buy?

Valued at $59.7 billion in market capitalization, with $3.7 billion in cash and barely $100 million in debt, Copart’s enterprise value stands at just about $56 billion. With $1.4 billion in trailing net income, that gives the stock a debt-adjusted price-to-earnings ratio of 40 — which already seems pretty expensive to me. Valued on free cash flow, though, which is only $1 billion over the past year, the stock’s EV/FCF ratio is an even pricier 56x.

As much as I think Copart is a quality business and dominant in its niche of the automotive industry, both these valuations seem too rich for a stock growing profits in the low to mid-teens. Ultimately, I have to conclude that Copart stock is a sell.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $380,291!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,278!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $484,003!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 18, 2024

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Copart. The Motley Fool has a disclosure policy.