Actually, the "research" terminology might be stretching it a bit. I get this weekly e-mail from Investor's Digest, which is a compilation of picks from a variety of newsletters. Each week I get a pick, which is included in the monthly newsletter. Here is the Copart tout.
Copart
Matt Stichnoth's Wall Street Companion thinks auto salvage operator
Copart (OTC - CPRT, $20) is just now shifting into second gear on its
way to salvage industry dominance.
"Copart is a giant among auto salvage operators. Which, as it happens,
is a better position to be in than you might think. Oh, and Copart also
happens to be a really attractive stock: the company has a wickedly strong
balance sheet, is growing at a mid-teens rate, and seems to have some
clear competitive advantages that should help it stay on top of the heap
(sorry) for years to come. Yet it trades at a strikingly low valuation.
And if, as, and when Wall Street wakes up to all this, Copart's stock
is apt to do some very big things. We would be buyers.
The salvage yards make their money either by buying and then reselling
vehicles outright or, more commonly, by collecting fees from the seller.
In Wall Street parlance, Copart is an 'industry rollup.' Which is to
say, it's growing by leaps and bounds (around 90% per year, actually,
since 1993) by buying up a slew of local salvage operations around the
country and then integrating them into a national network. Copart processes
over 400,000 cars per year at 53 different locations, and provides a full
range of salvage services, from title transfer to vehicle towing and storage.
It is the second-largest operator in the country, with 14% of the market.
This company looks and feels for all the world like a steady, double-digit
grower. Yet its stock remains surprisingly inexpensive. Consensus estimates
for the full year have the company earning $1.10 per share, up 22% from
1997. Then next year, earnings are supposed to rise another 14%, to $1.
25. The company doesn't quibble with those numbers. Copart trades at 20
times current-year earnings and 18 times next year's estimates.
What's more, Copart has an extremely strong balance sheet, and throws
off free cash by the ton. Debt as a percentage of capital was just 6%
at the end of the January quarter.
This is a company that has a strong position in an attractive business,
and that has the financial wherewithal to do all kinds of good things
for itself and its shareholders. We're bullish."
Wall Street Companion (4/10), Matthew M. Stichnoth, Ed.; Tri-Weekly
Publishing, 175 5th Ave., #2503, New York, NY 10010. (212)491-7610.
1 year, 17 issues, $220. IDD Plan: 1 year, $150.
I have never heard of Stichnoth. Investor's Digest may have reported his picks before, but I don't recall if they did. I actually found the stock through a stock screen for underpriced value smallcap stocks. Copart looks like a sound investment to me. I haven't bought yet because I am really looking for stocks that are both undervalued and have significant growth prospects. Copart had a nice run-up last month to the tune of 20% or so and I am not yet convinced that they are still significantly undervalued, although Stichnoth seems to think it is still a good buy. I have been watching for a dip in price for possible entry. I plan to look closer into Copart and then make a decision on an investment. What do you think about the prospects? |
