Should You Buy CarMax Stock Before Earnings?
CarMax (NYSE: KMX) is a large cap company that operates within the specialty retail industry. Its market cap is $13 billion today, and the total one-year return is 12.78% for shareholders.
CarMax stock is underperforming the market. It's beaten down, but it reports earnings soon. So is it a good time to buy? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics...
✗ Earnings-per-Share (EPS) Growth: CarMax reported a recent EPS growth rate of 25.27%. That's below the specialty retail industry average of 36.39%. That's not a good sign. We like to see companies that have higher earnings growth.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the specialty retail industry is 22.29. And CarMax's ratio comes in at 19.53. It's trading at a better value than many of its competitors.
✗ Debt-to-Equity : The debt-to-equity ratio for CarMax stock is 389.42%. That's above the specialty retail industry average of 97.13%. That's not a good sign. CarMax's debt levels should be lower.
✓ Free Cash Flow per Share Growth : CarMax's FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.
✗ Profit Margins : The profit margin of CarMax comes in at 4.66% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. CarMax's profit margin is below the specialty retail average of 6.76%. So that's a negative indicator for investors.
✓ Return on Equity : Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for CarMax is 21.66%, and that's above its industry average ROE of 21.11%.
CarMax stock passes three of our six key metrics today. That's why our Investment U Stock Grader rates it as a Hold.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
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