Title: Friday POW! (Pick of the Week) — Copart: Salvage King KO'd, Star CEO Back In the Ring Show: Haymaker Daily (Substack) — Friday POW! (Pick of the Week) — paid Guest: David Hay / The Haymaker Team; this week's pick and core analysis by contributor Daniel Bustamante Date: 2026-JUL-10 URL: https://haymaker.substack.com/p/friday-pow-6d3 Length: written post (no timestamps) Note: Paid written post, verbatim text. "This week's pick and core analysis come to us from Haymaker friend and frequent contributor, Daniel Bustamante." Referenced charts (5-yr P/S & P/E, 5-yr key financial data, long-term support chart) were not captured. The Buys/Trims/Holds/Sales portfolio tables were deferred to Monday's Portfolio Update edition. Body reproduced for personal study.
Preview:
Stock is down 45% from its highs, battered by soft volumes and a market that forgot how to have fun.
But wait, there's more!
Share buybacks are as aggressive as ever and the balance sheet is a literal fortress stuffed with cash, margins are rock-solid, and the long-term compounder thesis is still very much alive. (Think: high-moat marketplace + recession-resistant tailwinds + dirt-cheap valuation.)
The junkyard is interesting yet again.
Preface complete, this week's pick is…
Copart: Salvage King KO'd, Star CEO Back In the Ring
Deep Dive
Copart is the leading global provider of online vehicle auctions and remarketing services, specializing in salvage (total-loss), used, fleet, and wholesale vehicles. It operates primarily as an intermediary — it does not typically take ownership of vehicles but earns high-margin fees for processing, storing, transporting, titling, and auctioning them via its proprietary VB3 online platform. Sellers are mainly insurance companies (for totaled vehicles), plus banks/finance companies, rental fleets, dealers, and others. Basically, not a very "sexy" business and certainly one that won't be featured on CNBC, but a compounder nonetheless, and one that started way back in 1982.
Buyers include dismantlers, rebuilders, exporters, and dealers worldwide. Plus, they're expanding globally, which is a key theme in coming years.
Overview:
Platform and network effects moat: Scale (275+ locations across 11 countries, massive global buyer network, and adding) creates superior liquidity and pricing power versus smaller competitors. They're expanding quite a bit and a new operations center in Ireland is just one of those expansions this year and into next.
Asset-light, high-ROIC (return-on-invested-capital) service model: 80%+ of revenue is high-margin service fees (not vehicle sales), leading to strong earnings and low debt, which is great given the amount of free cash flow this stock puts out.
Secular and cyclical hybrid: Benefits from long-term structural shifts (digitization of auctions, rising vehicle complexity/repair costs) and economic stress (more distressed supply).
Real estate and tech hybrid: Owns strategically located land (appreciating asset) paired with a scalable online platform.
Defensive tilt/tailwind: Performs relatively well in downturns due to increased supply of vehicles needing remarketing and, given the recent rise in delinquencies, it's a theme that can certainly be a driver.
At its core, CPRT is a "pick and shovel" play on auto industry distress and insurance dynamics and a tailwind in this sector (that may just be starting).
The Financials
This is a company with a strong financial history that consistently spits out free cash flow, keeps low debt, and typically runs higher margins. Even with the recent dip, we expect this trend to continue given their strong hold on this industry.
Q3 FY2026: Revenue $1.237 billion (+2.1% YoY), Gross profit of $572.6 million (+3.7% YoY), Gross margin expanded to 46.3%. Operating income of $464.3 million (+2.8%). Net income of $402 million.
Nine months FY2026: Revenue $3.5 billion (roughly flat), strong profitability with diluted EPS $1.20 (+1.7%).
Balance sheet: Extremely strong: $4.2 billion cash + held-to-maturity securities, total liquidity $5.5 billion, minimal/no meaningful debt, which affords them adequate agility as needed.
Share Buybacks: Aggressive share repurchases, over $1.6 billion YTD (43+ million shares); that's meaningful relative to a $27 billion market cap. This is a big plus and we think something they needed to announce given the share price. After all, we'd prefer management to purchase equity on the lows, not waste capital at the peak.
Profitability: High and expanding margins (gross 46%, operating margins in the mid-30% range in recent quarters). A consistent theme for this business over the years and, despite the recent numbers, it likely gets back on track in the coming quarters given the tailwinds.
Five-Year Price/Sales and P/E Ratios
The stock has (obviously) pulled back significantly from 2025 highs (down 55% since last April), trading at a forward P/E of 17. This is very attractive for a high-quality compounder with all of the above attributes, making this pullback opportunistic.
Five-Year Analysis of Key Financial Data
As you can see, these numbers look great. Year after year, they've proven themselves to be a cash-flow machine. (Free, or excess, cash flow is shown on the last line; recall this is one of Warren Buffett's favorite indicators of a business's intrinsic value.)
Rising Auto-Loan Delinquencies: A Major Tailwind to Watch
U.S. auto loan delinquency rates have climbed to multi-year highs. The 90-day+ delinquency rate reached 5.6% in Q1 2026 (up significantly YoY and above prior peaks) and has not been this high since 2010.
And by the way, the next data release on this is scheduled for August 4th — we'll be watching this number closely at that time, along with the stock price reaction.
This has a direct positive impact on Copart:
Higher delinquencies lead to more loan defaults and repossessions by banks, finance companies, and lenders. These repossessed vehicles are consigned to auctions (non-insurance volume for Copart). This boosts unit volumes in the non-insurance segment, which is a meaningful and growing part of the business. Historical patterns show economic stress/recessions increase repo supply, providing a counter-cyclical volume boost for remarketers like Copart. And while recent softness in insurance volumes has been an issue, this dynamic helps Copart to pick up the "slack."
A Call To The Bullpen: Jay Adair Back as CEO
Current CEO, Jeff Liaw, will step down as of July 31, 2026. Jay Adair is returning to lead the company.
This is a net positive.
Why?
Because the horse is only as good as the jockey (if you'll indulge us yet another sports metaphor). Jay Adair was CEO from 2010 to 2024, but prior to that, he was rising through the ranks of Copart (he started in 1989 at the age of 19).
Adair oversaw a transformational period that turned Copart into a dominant online vehicle auction leader. The stock was a massive winner: 1,100%+ total return (or more, split-adjusted) during his main CEO tenure, dramatically outperforming the S&P 500. The company benefited enormously from the shift to online/VB3 auctions, international expansion, yard network growth, and rising total loss frequency — all executed strongly under Adair. Stock compounded at a high rate, reflecting strong revenue/earnings growth, margin expansion, and market share gains. It became a classic compounder story in the auto services space.
A Technical View: Build a Base, Then Rally?
The large price drop these past 12 months is nothing to brush off. It is serious, it is ugly, and it is obviously of concern. However, understanding why, as explained above, is key; understanding what could turn this around also helps.
While we think this is genuinely a long-term compounder, for patient investors this will need some time to build back a shareholder base. We'd like to see that happen for a month or so in the mid $20s, ideally.
From the technicians' perspective, bases are good to see as it demonstrates (among many things) that the narrative on the name is changing and that is the first thing that needs to happen here. For longer term, non-price-sensitive readers, high $20s still seems like an ideal place to begin looking.
As you can see from the following chart, it is close to long-term support. Hopefully that will hold, but it would be quite concerning if $25 was decisively broken to the downside — $24 or so would be a reasonable stop loss, or at least sell-down, threshold.
Conclusion
In a market obsessed with the next shiny thing, Copart reminds us that sometimes the best opportunities look like yesterday's junk — especially when their rockstar CEO is back behind the wheel. The salvage yard is open for business. Patient investors might just drive off with an appreciating asset… unlike a new car, ironically enough.
***We will be posting our Buys, Trims, Holds & Sales tables in Monday's Portfolio Update edition. Stay tuned.***