Copart Stock is On Sale for 16% Off... Is now the Time to Buy?

Short-term options traders have been put-biased

Jan 31, 2022 at 12:54 PM
facebook twitter linkedin


Despite a near 16% selloff in January for the shares of Copart, Inc. (NASDAQ: CPRT) it looks like the stock may have found its bottom near the $20 region -- which served as a floor back in May and June of last year -- and is on its way back up. In fact, the security was last seen up 1.5% at $127.41, as it looks ready to string together its second-straight win. The stock will still need to contend with almost all of its short- and long-term trendlines as it makes its way higher, though. This includes its 10-day moving average, which the security hasn't been able to breach in nearly a month. 

Short-term options traders have been much more put-biased than usual. This is per CPRT's Schaeffer's put/call open interest ratio (SOIR) of 1.08, which stands higher than 91% of readings from the past year. 

Analysts have held out hope for CPRT, however. Of the seven in coverage, five call the stock a "strong buy," compared to two "hold" ratings. Plus, the 12-month consensus price target of $170.11 is a 32% premium to current levels. 

Moreover, the online auction company has maintained consistent and considerable growth in recent years, increasing its annual revenues and net income 61% and 138%, respectively, since fiscal 2018. CPRT is also estimated to deliver a 7.19% increase in earnings and a 6.3% increase in revenues this year. In addition, Copart holds $1.3 billion in cash and $533.4 million in total debt, indicating a relatively healthy balance sheet.

However, on the fundamental flip side, CPRT’s biggest issue continues to be its valuation. Copart stock currently trades at a high price-earnings ratio of 30.22 and a rich price-sales ratio of 10.19, still pricing in multiple years of revenue and earnings growth despite its recent pullback. Overall, investors will want to see CPRT's valuation come down much more before adding it stock to their portfolio.

 




 
Special Offers from Schaeffer's Trading Partners