Copart: A market leader in an overlooked industry.

Copart is a global leader in online vehicle auctions, helping insurance companies, car dealers, rental fleets, and individual sellers connect with buyers around the world. The company operates a vast network of storage yards and runs its own online auction platform, which together make it the backbone of the salvage vehicle industry. As cars become more complex and expensive to repair, insurers increasingly turn to Copart to sell total-loss vehicles. At the same time, Copart is expanding into new areas like rental and fleet vehicles, which make its business more balanced and resilient. The question is: should this steady, quietly dominant company have a place in your long-term portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Copart at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Copart, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Copart runs one of the world’s largest online marketplaces for used and damaged vehicles. The company connects sellers such as insurance companies, car dealers, rental fleets, banks, and individual owners with a global network of buyers that includes dismantlers, repair shops, used-car dealers, and exporters. Most of the vehicles sold through Copart come from insurance companies after accidents or natural disasters. Instead of scrapping these vehicles, Copart helps them find new uses, many are repaired, resold, or dismantled for parts, which supports recycling and reduces waste. All auctions take place online through Copart’s own technology platform. Sellers list vehicles, and registered buyers from around the world can place bids in real time. This fully digital model allows Copart to reach far more buyers than a traditional physical auction, which typically leads to higher sale prices for sellers. The company earns money mainly through service fees, such as listing, bidding, storage, transportation, and document processing, rather than by owning the cars itself. In some markets like the U.K. and Germany, it also buys and resells vehicles or sells recycled parts. Copart has built hundreds of large storage and processing yards across eleven countries. These facilities handle pickup, photography, inspection, and paperwork before the vehicles go online. The company’s scale means it can respond quickly to events such as floods or hurricanes, retrieving and auctioning thousands of damaged cars for insurers. It also offers tools and software that help insurers make faster decisions about whether to repair or replace vehicles. Copart’s competitive moat is built on four pillars: powerful network effects, a vast and hard-to-replicate physical footprint, deep integration with insurance companies, and unmatched data advantages. The network effects come from its large global buyer base, which drives higher selling prices and attracts more supply, especially from insurers, creating a self-reinforcing cycle that strengthens with scale. Its extensive network of storage yards, many owned outright, provides a structural cost advantage that would be nearly impossible to replicate today due to high land costs and strict environmental regulations. Its technology and workflows are tightly integrated into insurance claims systems, making it expensive and risky for insurers to switch providers. Finally, decades of transaction data and vehicle imaging give Copart a pricing and analytical edge that improves outcomes for both buyers and sellers.

Management

Jeff Liaw serves as the CEO of Copart, a role he assumed in April 2024 after serving as Co-CEO since 2022. He joined Copart in 2016 as CFO, where he played a key role in strengthening the company’s financial foundation and supporting its global expansion. Prior to joining Copart, Jeff Liaw was the CFO of Fleetpride, the largest independent distributor of aftermarket truck parts in the United States. Earlier in his career, he was a Principal at TPG Capital, where he oversaw private equity investments across the financial services and industrial sectors. Jeff Liaw holds a bachelor’s degree in Finance and Business Administration from the University of Texas and an MBA from Harvard Business School. At Copart, Jeff Liaw represents the continuation of a clear leadership tradition that emphasizes long-term thinking, disciplined reinvestment, and operational excellence. He was mentored by former CEO Jay Adair, who himself was mentored by Copart’s founder Willis Johnson, a lineage that has helped preserve Copart’s unique culture and entrepreneurial mindset. Under Jeff Liaw’s leadership, Copart continues to channel most of its capital into assets that directly enhance customer outcomes, such as expanding its land portfolio and transportation capacity. He has also reaffirmed the company’s commitment to a multi-decade investment horizon and a consistent approach to capital allocation, focusing on infrastructure, marketplace diversification, and service innovation. Though Jeff Liaw has only recently taken on the role of sole CEO, his deep understanding of Copart’s operations, financial discipline, and long-term vision give confidence in his ability to sustain the company’s success. His leadership style reflects continuity and focus, prioritizing durable investments, customer trust, and the steady, compounding growth that has defined Copart for more than four decades.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Copart has historically delivered a very high ROIC because of its capital-light and highly efficient business model. Most of its income comes from service fees rather than owning vehicles, which keeps capital needs low. Once its network of storage yards and systems is in place, adding more volume costs little, giving it strong operating leverage. Its dominant market position, long-term relationships with insurers, and consistently high margins have also supported exceptional returns over time. The drop in ROIC in 2024 and 2025 doesn’t mean Copart’s business has weakened, it mainly reflects the timing of its investments. In 2024, Copart spent heavily on buying around 1.100 acres of new land to expand its yard network. That kind of spending raises the amount of capital invested right away, but the new sites take time to start generating profits, which temporarily pulls down returns. In 2025, ROIC fell further because of short-term cost pressures: inflation pushed up wages and transport costs, the company faced one-off expenses from hurricane damage, and depreciation increased as many newly built facilities began operating. This drop in ROIC is not a major concern. It reflects the company’s long-term mindset, spending heavily today on land, logistics, and technology to support future growth. These investments should enhance efficiency, expand capacity, and generate higher profits over time once the new assets are fully utilized. As these recent investments begin to contribute more meaningfully, and as temporary cost pressures ease, Copart’s ROIC is expected to gradually rise again.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Copart’s equity has increased every year for the past nine years because the company earns strong profits and keeps reinvesting them back into the business instead of paying dividends or using much debt. Each year, the profits that are not paid out are added to shareholders’ equity, which is why it keeps growing. Copart’s business model generates steady, high-margin cash flow, and since it owns much of its land and operates with little debt, almost all of its earnings stay within the company. The rise to a new all-time high in fiscal year 2025 reflects another year of solid profitability and reinvestment in new yards, land, and technology. This trend is likely to continue because Copart’s long-term strategy focuses on expanding its infrastructure and marketplace rather than distributing cash to shareholders. As long as the company keeps growing and maintaining its strong earnings, equity should keep increasing in the years ahead.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Copart has grown its free cash flow in most years because its business generates a lot of profit without needing much capital to run. The company earns steady fee income from its online vehicle auctions while keeping costs under control, so a large part of its profits turns directly into cash. Once Copart builds a yard or invests in technology, those assets can handle more volume without much additional spending, which makes the business very cash-generative. Free cash flow and levered free cash flow margin reached record highs in fiscal year 2025 because Copart had another year of strong earnings and efficient operations. Higher service revenue, solid pricing at auctions, and good cost management meant operating cash flow grew faster than capital spending. Even though the company continues to invest heavily in land and infrastructure, its ability to turn profits into cash has improved as it gains scale. This strong cash generation is expected to continue. Copart benefits from long-term trends like more complex vehicles, which are often declared total losses and sent to auction, and from its growing global buyer base. As the new yards and transportation capacity added in recent years start to operate at full capacity, they should contribute even more to cash flow. Copart mainly uses its free cash flow to reinvest in its business—buying land, expanding yards, and improving technology—but it also returns money to shareholders through share buybacks. Management has said it only repurchases shares when the valuation makes sense, rather than on a fixed schedule. Over the long term, Copart has regularly used buybacks and this is likely to remain the main way it returns cash to shareholders. The free cash flow yield indicates that Copart typically trades at a premium valuation. However, the current level suggests the stock is now priced at its most attractive valuation since fiscal year 2017. We will revisit valuation later in the analysis.

Debt

Another important aspect to examine is a company’s debt. We want to know whether the business carries a manageable level of debt that could reasonably be repaid within three years, which can be assessed by looking at the long-term debt-to-earnings ratio. In Copart’s case, this calculation shows that the company has no long-term debt at all. This is a very good sign. Having no debt means Copart doesn’t have to spend money on interest payments and isn’t exposed to the risk of rising borrowing costs. It also gives the company more freedom to use its cash for growth, like buying land, expanding its network, or investing in new technology.

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Risks

A shrinking insured vehicle pool is a risk for Copart because the company’s core business relies on vehicles that are processed through insurance claims, particularly those deemed total losses after accidents. When a car is insured and involved in a major accident, the insurance company typically takes ownership, declares it a total loss, and sends it to Copart to be auctioned. This “insurance total-loss funnel” is the foundation of Copart’s business model, as insurance companies account for more than 80% of the vehicles the company processes each year. However, when fewer vehicles are insured, fewer total-loss vehicles reach Copart’s auctions. In recent years, auto insurance premiums have increased substantially. As a result, many consumers have tried to reduce costs by lowering their coverage. Some have switched from comprehensive or collision insurance to liability-only coverage, which only covers damage done to other vehicles. Others have opted out of insurance altogether, especially among lower-income or younger drivers. When these underinsured or uninsured drivers are involved in accidents, their vehicles don’t go through the insurance system. Instead of being handled by an insurance carrier and sent to Copart, these cars may be repaired privately, sold directly for scrap, or even abandoned. This means fewer vehicles enter the salvage auction ecosystem, directly reducing the volume of cars that flow through Copart’s network. Industry data supports this concern. The metric known as “earned car years,” which tracks the number of insured vehicles, has fallen even as the total number of vehicles on the road has increased. In other words, while more cars exist overall, a smaller percentage are fully insured, shrinking Copart’s potential supply base. This shift doesn’t just affect Copart’s short-term volumes; it also creates uncertainty in forecasting future growth. If high insurance premiums persist or economic conditions weaken, the number of uninsured and underinsured vehicles could remain elevated, keeping auction volumes below potential.

Competition is a significant risk for Copart because the vehicle remarketing industry is highly competitive, and the company faces pressure from both large national players and smaller regional operators. Copart competes directly with other vehicle auction and remarketing companies, such as RB Global (which owns Insurance Auto Auctions), Carvana, Manheim, Openlane, and ACV Auctions, as well as with major vehicle dismantlers like LKQ Corporation. Many of these rivals already have strong relationships with insurance companies, the same key suppliers that Copart depends on, which makes it harder for Copart to win or retain long-term supply contracts. Some dismantlers even bypass auction platforms altogether by purchasing vehicles directly from insurers, reducing the number of cars flowing through Copart’s network. Competition is especially intense in markets with a limited number of vehicle sellers, such as the United Kingdom and parts of Europe. In these regions, the absence of long-term contracts means that competitors can quickly capture share by offering better pricing or more favorable terms. Moreover, Copart must also compete for land and storage facilities, which has become increasingly expensive as rivals look to expand their physical networks. This can drive up acquisition costs and make it more challenging for Copart to expand capacity in key regions. Adding to this, the merger between Insurance Auto Auctions and Ritchie Bros. has created a larger and more financially flexible competitor, potentially capable of matching Copart’s technology investments and global reach. While Copart remains the clear industry leader, any sustained market share loss or price competition could weigh on growth and profitability. The company’s scale and network effects provide a strong moat, but in a cyclical industry like vehicle remarketing, competition will always pose a risk, particularly if rivals become more aggressive in securing supply or expanding internationally.

The trend toward safer cars is a potential long-term risk for Copart because its business depends on a steady flow of damaged vehicles entering the insurance total-loss pipeline. As vehicles become safer and better equipped to prevent accidents, the number of collisions, and therefore total-loss vehicles, could gradually decline. Modern safety features such as automatic emergency braking, adaptive cruise control, lane-keeping assistance, blind-spot detection, and traction control have already helped reduce accident frequency over the past several decades. This means that, even though there are more cars on the road today, the overall number of crashes per mile driven has steadily decreased. For Copart, this trend poses a challenge because fewer accidents mean fewer vehicles written off by insurers and fewer cars to sell through its auctions. As vehicles continue to be built with advanced materials and smart technologies designed to prevent or minimize collisions, the balance could eventually shift, reducing both the frequency and severity of total losses. Looking further ahead, the development of autonomous driving technology could amplify this risk. While self-driving cars are still in early stages and limited to controlled environments, their widespread adoption could dramatically reduce accident rates once they become mainstream. Even a partial reduction in human driving errors would have a meaningful impact on the number of vehicles entering Copart’s system. At present, the effect remains gradual and manageable, as total-loss volumes have continued to grow despite safer vehicles. But in the long term, if accident prevention technology and autonomous systems advance faster than repair costs rise, Copart could face slower growth in vehicle supply, a structural challenge to its core business model.

Reasons to invest

Investing in auction liquidity is a reason to invest in Copart. Auction liquidity, the depth and competitiveness of bidding on its platform, is the foundation of Copart’s entire business model and one of its most important long-term priorities. Management repeatedly emphasizes that everything the company does ultimately ties back to liquidity: a highly active and global buyer base ensures that every vehicle attracts strong bidding competition, which in turn drives higher selling prices for Copart’s clients, especially insurance companies. In simple terms, the more bidders there are for each vehicle, the higher the final sale price tends to be. This creates a powerful cycle: strong returns for sellers attract more vehicles to Copart’s platform, which draws even more buyers, further strengthening liquidity. This flywheel effect has allowed Copart to consistently deliver industry-leading selling prices. In fiscal year 2025, for instance, average selling prices for U.S. insurance vehicles grew 5,7% year-over-year, far outpacing broader used vehicle value indices and competitors. To maintain and enhance this advantage, Copart continually invests in improving the buyer experience. These investments include expanding its global member base, making it easier for buyers to discover, bid on, and transport vehicles, and integrating services like financing, warranties, and digital tools that reduce friction during the auction process. Every improvement that attracts more bidders or keeps them more engaged directly reinforces the company’s liquidity advantage. As CEO Jeff Liaw has put it, auction liquidity, client service, and strong selling prices are priorities “for every fiscal year.” By focusing relentlessly on liquidity, Copart strengthens its competitive moat and ensures that insurance carriers continue to choose its platform for the best returns. This consistent focus on driving auction activity and maximizing vehicle value is what sustains Copart’s growth, pricing power, and leadership in the global salvage auction industry, making it a compelling reason to invest.

Growth among non-insurance sellers is an important reason to invest in Copart because it adds diversification, strengthens its auction platform, and opens new paths for long-term growth beyond its core insurance business. While insurance companies still provide most of Copart’s vehicle supply, the company has been expanding into other segments such as rental car fleets, banks, financing companies, dealerships, and corporate fleets, all of which have vehicles to sell regularly. This expansion makes Copart less dependent on the insurance market and brings in a wider variety of vehicles, including more drivable and newer cars. These attract a broader range of buyers, which increases activity on the platform and helps drive stronger selling prices. Management has described this as a mutually reinforcing relationship: selling more cars from non-insurance sellers makes the platform more attractive to buyers, which in turn benefits insurance clients by creating greater demand and higher prices for their vehicles too. Two initiatives highlight this success. BlueCar, which serves banks, rental car operators, and fleet partners, grew 15,3% year over year in fiscal 2025, much faster than Copart’s overall volumes. It focuses on selling repossessed, end-of-lease, and fleet vehicles using Copart’s existing yards and logistics network. Purple Wave, Copart’s online marketplace for heavy equipment and agricultural vehicles, grew gross transaction value by 9,4% in fiscal 2025, outperforming the broader industry despite a cautious market. Together, these non-insurance segments make Copart’s business more balanced and resilient. They expand the company’s vehicle supply, bring in new buyers, and strengthen the overall auction ecosystem. In the long run, growth among non-insurance sellers should help Copart maintain steady performance even when insurance volumes fluctuate, supporting continued growth in both revenue and profitability.

Rising repair costs are a strong reason to invest in Copart because they directly increase the number of vehicles declared as total losses, the foundation of Copart’s business model. As vehicles become more advanced and packed with technology, even minor accidents can lead to very costly repairs. Features like advanced driver assistance systems, adaptive headlights, lane-departure sensors, and complex electronics require specialized labor and calibration after an accident. This makes it more expensive and time-consuming to repair a damaged car, often pushing insurers to deem it uneconomical to fix. When repair costs rise faster than vehicle values, insurance companies are more likely to “total” the vehicle and send it to auction instead. This trend creates a steady and growing flow of vehicles for Copart to sell through its global platform. According to CCC’s recent Crash Course report, 31% of repair estimates in early 2025 involved calibration work, up from 24% the year before, highlighting just how quickly repair complexity and costs are climbing. Electric vehicles (EVs) add another layer to this trend. While EV adoption is still in its early stages, these vehicles tend to have even more sensors, cameras, and software that must be recalibrated or replaced after collisions. Even minor damage can require expensive repairs, making EVs more likely to be written off compared to traditional vehicles. So far, Copart has seen strong returns from EVs, as they total more easily and command higher selling prices due to global demand for used EV parts. Overall, rising repair costs are not a temporary issue, they reflect a structural shift in the auto industry toward greater complexity and advanced technology. This shift benefits Copart by ensuring a consistent supply of total-loss vehicles over time. As more insurers opt to total rather than repair, Copart’s inventory and auction volumes should continue to grow.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 1,59, which is from fiscal 2025. I have selected a projected future EPS growth rate of 13%. Finbox expects EPS to grow by 12,4% in the next five years, but 15% is the highest number I use. Additionally, I have chosen a projected future P/E ratio of 26, which is twice the growth rate. This decision is based on the fact that Copart has historically had a higher P/E ratio. Lastly, our minimum acceptable rate of return is already set at 15%. Doing the calculations, we come up with the sticker price (some call it fair value or intrinsic value) of $34,69. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Copart at a price of $17,34 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 1.800, and capital expenditures were 569. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 398 in our calculations. The tax provision was 347. We have 966,9 outstanding shares. Hence, the calculation will be as follows: (1.800 – 398+ 347) / 966,9 x 10 = $18,09 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Copart's Free Cash Flow Per Share at $1,27 and a growth rate of 13%, if you want to recoup your investment in 8 years, the Payback Time price is $18,31.

Conclusion

I believe that Copart is an intriguing company with strong management. The company has built a durable competitive moat through its powerful network effects, a vast and hard-to-replicate physical footprint, deep integration with insurance companies, and valuable data advantages. It has consistently achieved a high ROIC and delivered record free cash flow and free cash flow margin in fiscal year 2025, all while maintaining a debt-free balance sheet. A shrinking insured vehicle pool is a risk for Copart because its business depends on cars processed through insurance claims, which make up more than 80% of its volume. As rising premiums lead more drivers to reduce or drop coverage, fewer vehicles enter the total-loss pipeline, resulting in fewer cars available for Copart’s auctions and adding uncertainty to future growth. Competition is also a risk because Copart operates in a crowded industry with large rivals such as RB Global, Manheim, and LKQ that compete for the same insurance partners and vehicle supply. Greater competition, especially after recent consolidation and rising land costs, could make it harder for Copart to secure vehicles, expand capacity, and maintain its market share. The trend toward safer cars is another potential challenge, as improved safety systems and the rise of autonomous driving could reduce accident frequency over time, lowering the number of damaged vehicles available for auction. On the positive side, investing in auction liquidity is a major reason to own Copart, as a strong and active buyer base drives higher selling prices and attracts more vehicles to the platform, creating a reinforcing cycle of growth. By continually improving the buyer experience and expanding globally, Copart strengthens this liquidity advantage, which supports its pricing power and long-term leadership. Growth among non-insurance sellers is another reason to invest, as it diversifies Copart’s vehicle supply and reduces reliance on insurers. Expanding relationships with banks, rental fleets, and dealers through initiatives such as BlueCar and Purple Wave brings in more drivable vehicles and new buyers, boosting auction activity and platform resilience. Rising repair costs also support Copart’s growth because as vehicles become more complex and expensive to fix, insurers are more likely to declare them total losses, increasing the number of vehicles flowing into Copart’s auctions. Overall, I believe Copart is a high-quality business, and buying shares around $36, which aligns with the intrinsic value based on both the Ten Cap and Payback Time methods, could represent a solid long-term investment.

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