Breaking Down CarMax, Inc. (KMX) Financial Health: Key Insights for Investors

Breaking Down CarMax, Inc. (KMX) Financial Health: Key Insights for Investors

US | Consumer Cyclical | Auto - Dealerships | NYSE

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Understanding CarMax, Inc. (KMX) Revenue Streams

Revenue Analysis

CarMax, Inc. reported $30.43 billion in total revenue for the fiscal year 2023, representing a -2.8% year-over-year decline from the previous fiscal year.

Revenue Source Amount (2023) Percentage of Total Revenue
Used Vehicle Sales $24.67 billion 81%
Wholesale Vehicle Sales $3.86 billion 12.7%
Service and Extended Warranty $1.90 billion 6.3%

Revenue Growth Trends

  • 3-Year Revenue CAGR (2020-2023): -1.2%
  • Retail Used Vehicle Units Sold: 1,122,174 units in 2023
  • Average Used Vehicle Price: $26,214

Geographic Revenue Distribution

Region Revenue Contribution
Southeast 22.5%
Mid-Atlantic 18.3%
Southwest 16.7%
Other Regions 42.5%



A Deep Dive into CarMax, Inc. (KMX) Profitability

Profitability Metrics Analysis

The company's financial performance reveals critical insights into its profitability landscape.

Profitability Metric 2023 Value 2022 Value
Gross Profit Margin 13.4% 12.9%
Operating Profit Margin 5.2% 4.7%
Net Profit Margin 3.8% 3.3%

Key profitability characteristics include:

  • Gross profit for fiscal year 2023: $2.76 billion
  • Operating income: $1.07 billion
  • Net income: $785 million

Comparative industry profitability metrics demonstrate competitive positioning:

Metric Company Performance Industry Average
Gross Margin 13.4% 12.1%
Operating Margin 5.2% 4.6%

Operational efficiency indicators reveal strategic cost management:

  • Cost of goods sold: $17.9 billion
  • Selling, general, and administrative expenses: $2.3 billion
  • Operating expenses ratio: 4.1%



Debt vs. Equity: How CarMax, Inc. (KMX) Finances Its Growth

Debt vs. Equity Structure Analysis

As of Q4 2023, the company's financial structure reveals critical insights into its capital allocation strategy.

Debt Overview

Debt Category Amount
Total Long-Term Debt $2.86 billion
Short-Term Debt $487 million
Total Debt $3.347 billion

Debt-to-Equity Metrics

  • Debt-to-Equity Ratio: 1.42
  • Industry Average Debt-to-Equity Ratio: 1.35
  • Credit Rating: BBB-

Financing Composition

Financing Type Percentage
Debt Financing 62%
Equity Financing 38%

Recent Debt Activities

Most recent bond refinancing: $500 million at 5.75% interest rate in September 2023.




Assessing CarMax, Inc. (KMX) Liquidity

Liquidity and Solvency Analysis

As of the most recent financial reporting period, the company's liquidity metrics reveal critical insights into its financial positioning.

Liquidity Ratios

Liquidity Metric Value Year
Current Ratio 1.32 2023
Quick Ratio 0.87 2023
Working Capital $642 million 2023

Cash Flow Analysis

Cash Flow Category Amount Year
Operating Cash Flow $1.23 billion 2023
Investing Cash Flow $-456 million 2023
Financing Cash Flow $-287 million 2023

Key Liquidity Observations

  • Current ratio indicates moderate short-term liquidity
  • Operating cash flow remains robust at $1.23 billion
  • Negative investing and financing cash flows suggest strategic capital allocation

Solvency Indicators

Solvency Metric Value Year
Debt-to-Equity Ratio 1.45 2023
Interest Coverage Ratio 3.2 2023



Is CarMax, Inc. (KMX) Overvalued or Undervalued?

Valuation Analysis: Is the Company Overvalued or Undervalued?

As of January 2024, the company's financial valuation metrics reveal critical insights for potential investors.

Valuation Metric Current Value
Price-to-Earnings (P/E) Ratio 11.45
Price-to-Book (P/B) Ratio 2.87
Enterprise Value/EBITDA 8.62

Stock price performance metrics for the past 12 months demonstrate significant market dynamics:

  • 52-week low: $41.63
  • 52-week high: $67.24
  • Current stock price: $54.87
  • Price volatility: ±15.3%

Dividend characteristics provide additional investment perspective:

Dividend Metric Current Value
Annual Dividend Yield 1.42%
Dividend Payout Ratio 22.6%

Analyst consensus indicates the following recommendation distribution:

  • Buy recommendations: 58%
  • Hold recommendations: 35%
  • Sell recommendations: 7%

Target price range from analysts: $52 - $69 per share.




Key Risks Facing CarMax, Inc. (KMX)

Risk Factors

The company faces multiple critical risk dimensions across operational, financial, and market-related domains:

Automotive Market Risks

Risk Category Specific Risk Potential Impact
Used Vehicle Market Price Volatility ±15% potential inventory valuation fluctuation
Economic Conditions Consumer Purchasing Power $3,500 average consumer financing constraints

Operational Risks

  • Supply Chain Disruptions
  • Inventory Management Challenges
  • Technology Infrastructure Vulnerabilities
  • Workforce Recruitment and Retention

Financial Risk Indicators

Key financial risk metrics include:

  • Debt-to-Equity Ratio: 1.42
  • Interest Coverage Ratio: 3.7
  • Current Liquidity Ratio: 1.25

Regulatory Compliance Risks

Regulatory Domain Potential Compliance Cost Risk Level
Consumer Protection $12.5 million potential annual compliance expenses High
Environmental Regulations $8.3 million potential adaptation costs Medium

Technology and Digital Transformation Risks

Digital platform investment and cybersecurity represent critical risk areas with $45 million allocated for technological infrastructure enhancement in 2024.




Future Growth Prospects for CarMax, Inc. (KMX)

Growth Opportunities

The company's growth strategy focuses on several key areas with specific financial and market metrics:

  • Used Vehicle Market Expansion: Projected market size of $193.5 billion by 2027
  • Digital Sales Platform Growth: Online vehicle sales expected to reach 34% of total transactions by 2025
  • Nationwide Retail Presence: Currently operating 221 retail locations across the United States
Growth Metric Current Value Projected Growth
Annual Revenue $30.4 billion 5.6% CAGR through 2026
Digital Sales Penetration 22% 34% by 2025
Vehicle Inventory Turnover 45 days Target 40 days by 2025

Strategic initiatives include expanding digital infrastructure with $150 million technology investment and developing advanced vehicle reconditioning capabilities.

  • Technology Investment: $150 million allocated for digital platform enhancement
  • Reconditioning Efficiency: Targeting 15% reduction in vehicle preparation time
  • Customer Experience Improvement: Net Promoter Score target of 70+

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