CPRT - Copart

[shalab]

Copart is doing a tender with odd lot preference at $38/share. May be there is enough in it to get beer money for the superbowl  ;D

[beerbaron]

Now if we could just find 30 like these a year it would make a nice return for the pocket change.

 

BeerBaron

[Sullivcd]

Check out COSN if you need an extra keg for the game.

[SmallCap]

Check out COSN if you need an extra keg for the game.

 

Sullivcd, I am checking into it, could you give any of the details that you are aware of?

 

at first glance it looks like a decent smalltime arbitrage play. Do you know if they accept street name accounts that hold less then 500 shares?

 

SmallCap

[ericd1]

It doesn't look like street names will work...

 

http://www.prnewswire.com/news-releases/cosine-communications-inc-announces-plan-to-terminate-registration-of-its-common-stock-101837008.html

 

Excerpt - As a result, beneficial stockholders holding shares in "street name" through a nominee (such as a bank or a broker) and registered stockholders owning 500 or more shares of common stock will not be impacted by the reverse/forward stock splits and retain their current numbers of shares of common stock without change. If, after completion of the reverse and forward stock splits, CoSine has fewer than 300 shareholders of record, CoSine intends to terminate the registration of its common stock under the Securities Exchange Act of 1934, as amended. If that occurs, CoSine will be relieved of its requirements to comply with the Sarbanes-Oxley Act of 2002 and to file periodic reports with the SEC, including annual reports on Form 10-K and quarterly reports on Form 10-Q. CoSine intends to continue to provide interim unaudited financial information and annual audited financial information to its stockholders.

[rmitz]

It doesn't look like street names will work...

 

http://www.prnewswire.com/news-releases/cosine-communications-inc-announces-plan-to-terminate-registration-of-its-common-stock-101837008.html

 

Excerpt - As a result, beneficial stockholders holding shares in "street name" through a nominee (such as a bank or a broker) and registered stockholders owning 500 or more shares of common stock will not be impacted by the reverse/forward stock splits and retain their current numbers of shares of common stock without change. If, after completion of the reverse and forward stock splits, CoSine has fewer than 300 shareholders of record, CoSine intends to terminate the registration of its common stock under the Securities Exchange Act of 1934, as amended. If that occurs, CoSine will be relieved of its requirements to comply with the Sarbanes-Oxley Act of 2002 and to file periodic reports with the SEC, including annual reports on Form 10-K and quarterly reports on Form 10-Q. CoSine intends to continue to provide interim unaudited financial information and annual audited financial information to its stockholders.

 

Yup.  Just took a minute to look and saw that little issue...

[Sullivcd]

Here is more detail from the proxy statement:

 

Only the shares of Common Stock of those stockholders of record, or “record holders,” identified in our records of security holders as holding less than 500 shares of Common Stock will be exchanged for cash in the Transaction. If you hold your shares in “street name” through a nominee (such as a bank, broker or other third party), you are not considered to be the record holder of those shares. Instead, you are the “beneficial owner” of those shares and your nominee is the record holder. If your nominee is identified in our records of security holders as the record holder of less than 500 shares of Common Stock in the aggregate, those shares will be exchanged for cash in the Transaction. However, your nominee may or may not be identified in our records of security holders as holding your shares. In most cases, your nominee will hold your shares in a “street name” account with Cede & Co. and Cede & Co. is listed on our records of security holders as holding those shares, in which case your shares will not be affected by the Transaction. The Transaction will not affect shares of Common Stock held in “street name” accounts with Cede & Co. regardless of the number of shares held by any beneficial owner. Each share of Common Stock held in accounts with Cede & Co. will continue to represent one share of Common Stock after completion of the Transaction. If you believe you may hold shares of Common Stock in “street name,” you should contact your nominee to determine how your shares are held and whether they will be affected by the Reverse Stock Split or the Forward Stock Split.

 

We elected to structure the Transaction so that it would only affect those record holders identified in our records of security holders to allow stockholders and beneficial owners some flexibility with respect to whether they will continue to hold shares of our Common Stock after the Transaction and to reduce the cost of the Transaction to the Company. If you hold fewer than 500 shares of Common Stock in “street name” through a nominee holding shares in an account with Cede & Co. and prefer to have your shares exchanged for cash in the Transaction, you must instruct your nominee to transfer, prior to the effective time of the Reverse Stock Split, your shares into a record account in your name in a timely manner so that you will be considered the record holder immediately prior to the Reverse Stock Split. If you hold fewer than 500 shares of Common Stock in your own name as a record holder or in “street name” through a nominee not holding shares in an account with Cede & Co. and do not want to have your shares exchanged for cash in the Transaction, you must, prior to the effective time of the Reverse Stock Split, acquire sufficient additional shares to cause you to hold of record in your or such nominee’s name a minimum of 500 shares or transfer your shares to a “street name” account with Cede & Co. Given the historically limited liquidity in our stock, we cannot assure you that any shares will be available for purchase and thus there is a risk that you may not be able to acquire sufficient shares to meet or exceed the required 500 shares. If you are unable to do so and do not otherwise transfer your shares to a “street name” account with Cede & Co., your shares will be cashed out and you will no longer remain a stockholder after the effective time of the Reverse Stock Split.

[beerbaron]

Anybody get it's money on CPRT?

 

BeerBaron

[Bme3412]

I am looking into this one. CPRT has a favorable industry structure with expanding end markets and potential for long term volume growth. I'm attracted to the story now for margin growth potential: management cancelled a 2-year investment project, so general and administrative costs should decrease as costs are rationalized. Management will be free to focus on international expansion which should soon drive the stock.

 

CPRT, which has a website and provides services for the salvaged car auction industry, is a contrarian play on the North American auto boom and increasing content inside cars. In a nutshell, there are a lot of old cars on the road, which should drive a sustained replacement cycle. CRPT should benefit from this: due to low salvage value of older cars, it should not be economical for insurers to reap benefits from providing services. These cars have to go somewhere - sold on the secondary market, sold for parts, sold as scrap metal, etc - and this is where CPRT comes in - they are the ebay of the used car industry. They run an online auction for used cars. The website is recently updated, including for mobile devices.

 

They have a presence overseas (UK, Brazil, Spain, UAE, Germany), and were in the process of rolling out a new enterprise system, which would have sen sustained investment for the next 2 years. Management decided to simplify, and cancelled the project, taking a $29mm impairment.

 

The company has been under earning somewhat due to bad luck but also due to management stretching itself too thin. The company saw huge demand for salvaged cars from hurricane sandy, but wasn't prepared to deal with the explosion in demand, and margins suffered. Dealing with hurricane sandy caused management to take its eye off the ball: at the time the strategy had been to integrate a recent acquisition while expanding to new global markets.

 

Now is the time to own the stock as margins should inflect, and management will have enough time to invest in and benefit from networks efforts of international growth. The acquisition is completely integrated. There is a large runway for profitable growth.

[Liberty]

New free writeup about CPRT (and KAR) at Scuttleblurb. No sub required for that one. Good stuff:

 

https://www.scuttleblurb.com/cprt_kar/

[glorysk87]

I think the story behind CPRT is pretty well understood - that said, why is 20x EBITDA justified for a sub-10% growth company?

[Broeb22]

I agree the valuation is a little high overall at 24.5x EBITDA, but your question of why should a company with <10% growth ever be valued at 20x EBITDA misses the difference in returns on capital companies earn.

 

Moody's is a great example. Growth somewhat above global GDP growth, but earns enormous returns on capital, so it too is valued >20x EBITDA.

 

The difference between CPRT and a company like MCO is that CPRT has attractive reinvestment opportunities in opening up new locations whereas MCO does not really have as significant reinvestment opportunities.

[Okonomen]

How can Copart's margins be that much higher than e.g. Kar's?

 

And has anyone noticed KAR trading close to 10% FCF yield? (maybe it deserves a seperate topic)

 

[Spekulatius]

How can Copart's margins be that much higher than e.g. Kar's?

 

And has anyone noticed KAR trading close to 10% FCF yield? (maybe it deserves a seperate topic)

 

How do you 10% FCF yield for KAR? Adding back $60M in amortization annually only gets you to ~$1.65 in FCF/ share, which is far short of 10%.

[Okonomen]

How can Copart's margins be that much higher than e.g. Kar's?

 

And has anyone noticed KAR trading close to 10% FCF yield? (maybe it deserves a seperate topic)

 

How do you 10% FCF yield for KAR? Adding back $60M in amortization annually only gets you to ~$1.65 in FCF/ share, which is far short of 10%.

 

I dont see net income+amort as FCF. However, I just looked on BB that consensus FCFE is ~500 mUSD the next 2 years. Thaths even more than 10% FCFE yield but didnt bother calculating much. But I see now that BB may not have reflected the IAA spinoff yet, which is quite sad given the super high cost of BB subscription

 

[Scuttlebutt Plunger]

Difference in margins for CPRT and IAA stem from real estate strategy.  IAA rents, while CPRT owns. 

[Spekulatius]

How can Copart's margins be that much higher than e.g. Kar's?

 

And has anyone noticed KAR trading close to 10% FCF yield? (maybe it deserves a seperate topic)

 

How do you 10% FCF yield for KAR? Adding back $60M in amortization annually only gets you to ~$1.65 in FCF/ share, which is far short of 10%.

 

I dont see net income+amort as FCF. However, I just looked on BB that consensus FCFE is ~500 mUSD the next 2 years. Thaths even more than 10% FCFE yield but didnt bother calculating much. But I see now that BB may not have reflected the IAA spinoff yet, which is quite sad given the super high cost of BB subscription

I don’t use Bloomberg, but I can attest that many datasets for spinoffs are incorrect month after a spinoff occurs. You always have to go back to the filings and those are a mess itself.

[chrispy]

The stock price may have gotten ahead of itself leading to the earnings report. The current PE has historically been a good time to buy

[glorysk87]

The stock price may have gotten ahead of itself leading to the earnings report. The current PE has historically been a good time to buy

 

It's trading at 31x earnings. Historically it's rarely been at or above this level, ever. How do you consider this a good point to buy historically speaking? I could be missing something but that statement doesn't make much sense to me...not making a judgment as to whether it's a good buy going forward. But to frame is as a good value vs history seems misleading at best.