Head to Head Survey: CarMax (KMX) versus KAR Auction Services (KAR)

CarMax (NYSE: KMX) and KAR Auction Services (NYSE:KAR) are both retail/wholesale companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, analyst recommendations, profitability, risk and dividends.

Analyst Recommendations

This is a summary of current ratings and recommmendations for CarMax and KAR Auction Services, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CarMax 0 8 12 0 2.60
KAR Auction Services 0 2 7 0 2.78

CarMax presently has a consensus target price of $83.06, indicating a potential upside of 13.51%. KAR Auction Services has a consensus target price of $58.63, indicating a potential upside of 6.94%. Given CarMax’s higher probable upside, equities analysts clearly believe CarMax is more favorable than KAR Auction Services.

Dividends

KAR Auction Services pays an annual dividend of $1.40 per share and has a dividend yield of 2.6%. CarMax does not pay a dividend. KAR Auction Services pays out 56.0% of its earnings in the form of a dividend. KAR Auction Services has raised its dividend for 5 consecutive years.

Earnings & Valuation

This table compares CarMax and KAR Auction Services’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CarMax $17.12 billion 0.76 $664.11 million $3.70 19.78
KAR Auction Services $3.46 billion 2.14 $362.00 million $2.50 21.93

CarMax has higher revenue and earnings than KAR Auction Services. CarMax is trading at a lower price-to-earnings ratio than KAR Auction Services, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

CarMax has a beta of 1.56, indicating that its stock price is 56% more volatile than the S&P 500. Comparatively, KAR Auction Services has a beta of 1.08, indicating that its stock price is 8% more volatile than the S&P 500.

Profitability

This table compares CarMax and KAR Auction Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CarMax 3.98% 21.54% 4.10%
KAR Auction Services 10.81% 24.93% 5.22%

Insider and Institutional Ownership

99.5% of KAR Auction Services shares are owned by institutional investors. 2.0% of CarMax shares are owned by insiders. Comparatively, 1.3% of KAR Auction Services shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

KAR Auction Services beats CarMax on 9 of the 17 factors compared between the two stocks.

About CarMax

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles in the United States. The company operates in two segments, CarMax Sales Operations and CarMax Auto Finance. It offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles; vehicles that do not meet its retail standards to licensed dealers through on-site wholesale auctions; and extended protection plans to customers at the time of sale. The company also provides reconditioning and vehicle repair services; and financing alternatives for retail customers across a range of credit spectrum through its CarMax Auto Finance and arrangements with various financial institutions. In addition, it sells new vehicles under franchise agreements. As of April 4, 2018, the company operated 189 stores in 41 states. CarMax, Inc. was founded in 1993 and is based in Richmond, Virginia.

About KAR Auction Services

KAR Auction Services, Inc., together with its subsidiaries, provides used car auction and salvage auction services in the United States, Canada, Mexico, and the United Kingdom. The company operates through three segments: ADESA Auctions, IAA, and AFC. The ADESA Auctions segment offers whole car auctions and related services to the vehicle remarketing industry through online auctions and auction facilities. It also provides value-added services, such as auction related, transportation, reconditioning, inspection, title and repossession administration and remarketing, vehicle research, and analytical services, as well as data. This segment sells its products and services through vehicle manufacturers, fleet companies, rental car companies, finance companies, and others. The IAA segment offers various loss solutions and salvage vehicle auction services that facilitate the remarketing of vehicles for a range of sellers, including insurance companies, dealerships, rental car companies, fleet lease companies, and charitable organizations. This segment also provides catastrophe, vehicle inspection center, and transportation and towing services. The AFC segment offers floorplan financing, a short-term inventory-secured financing, to independent used vehicle dealers. As of December 31, 2017, the company had a network of 75 whole car auction locations and 175 salvage auction sites. The company was formerly known as KAR Holdings, Inc. and changed its name to KAR Auction Services, Inc. in November 2009. KAR Auction Services, Inc. was founded in 2006 and is headquartered in Carmel, Indiana.

Receive News & Ratings for CarMax Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for CarMax and related companies with MarketBeat.com's FREE daily email newsletter.


Leave a Reply