Copart (CPRT): FY2025 Results Show Margin Strength but Growth Deceleration Raises Questions

Q4/FY2025 — A Profit Beat, a Revenue Slowdown, and a Market That Wanted More#

Copart reported fiscal‑year 2025 revenue of $4.65 billion, up +9.67% year‑over‑year, while FY2025 net income reached $1.55 billion (+13.97% YoY); yet the market reaction after the company’s late‑summer release was muted and stock movement turned negative despite an EPS beat in Q4. The quarter delivered an EPS print of $0.41 against an analyst estimate of $0.3613 (an outperformance of +13.49% on that comparison), but investors seized on a modest revenue miss and evidence that top‑line momentum is slowing. That contrast — robust margin expansion and cash conversion versus decelerating sales — is the single most important thread running through Copart’s FY2025 story and frames the company’s near‑term risk/reward.

This matters because Copart trades with a premium multiple versus more cyclical parts of the auto market: trailing P/E based on the most recent quote is ~30.45x (price $48.42 / EPS $1.59), and price‑to‑sales is about 10.07x. At those valuations, investors are less forgiving of a growth slowdown than they would be for a lower‑multiple, slower‑growth business. Put simply, Copart’s quality — margin strength, technological edge, and cash generation — remains intact, but the market is asking for clearer evidence that revenue growth will reaccelerate before it rewards the company’s premium multiple again (Copart FY2025 results)[https://investors.copart.com].

Performance in the Numbers: Profitability Held Up, Cash Flow Strengthened#

Copart’s FY2025 financial statements show an operational business that converted revenue into profit at scale. On the income statement, gross profit for FY2025 was $2.10 billion, which implies a gross margin of ~45.16% (2.10 / 4.65). Operating income of $1.70 billion translates to an operating margin of ~36.56%, and net income of $1.55 billion produced a net margin of ~33.33%. Those margin levels are consistent with the company’s multi‑year record of strong profitability and indicate the business continued to deliver operating leverage even as volume dynamics softened in parts of the business (Copart FY2025 financials)[https://investors.copart.com].

Cash flow is where Copart’s optionality shows up most clearly. The company generated $1.80 billion of cash from operations and reported free cash flow of $1.23 billion for FY2025. That equates to an FCF conversion (free cash flow / net income) of ~79.35%, a robust conversion rate that gives management the capacity to invest in technology, expand internationally, or deploy capital in other ways without leaning on external financing. The balance sheet is similarly supportive: combined cash and short‑term investments are shown at $4.79 billion while total debt is $103.74 million, yielding a net cash position (our calculation) of ~$4.69 billion — a figure we derive as cash & short‑term investments minus total debt. Note there is a reporting inconsistency inside the supplied dataset (a netDebt value of -2.68B appears in one table); we prioritize the underlying line items (cash & investments and total debt) for our net cash calculation and discuss the discrepancy below.

Finally, the company converted scale into returns: FY2025 return on equity using FY2025 net income and year‑end equity (Net Income $1.55B / Total Stockholders’ Equity $9.19B) equals ~16.87% for the fiscal year. That is slightly below the TTM ROE figure reported in the dataset (_ROE TTM 18.18%), reflecting timing and TTM differences between the two measures.

Two Tables: Income Statement & Balance Sheet Highlights (FY2022–FY2025)#

(Above figures from Copart FY2025 financial statements — revenue and margins computed from reported line items)[https://investors.copart.com].

(Where stated, numbers are from Copart’s FY2025 filings; net cash is calculated by Monexa AI from the provided line items)[https://investors.copart.com].

Why the Market Sold Off: Growth Deceleration and Valuation Sensitivity#

Quarterly detail matters. Copart’s Q4 FY2025 reported an EPS beat — $0.41 actual vs. $0.3613 estimate (+13.49%) per the dataset — but revenue dynamics were the immediate focus for investors. Global unit volumes softened (the dataset references a modest decline in global units year‑over‑year), and Q4 revenue missed consensus by a narrow margin. For a company trading at a premium multiple, that near‑term growth deceleration is enough to induce multiple compression or at least a reassessment of upside.

Valuation arithmetic helps explain the reaction. Using the most recent market cap in the dataset ($46.82B) and reported FY2025 EBITDA of $2.11B, we calculate an enterprise value (EV) of roughly $42.13B (market cap + debt - cash & short‑term investments) and an EV/EBITDA of ~19.97x. That is lower than an EV/EBITDA multiple reported elsewhere in the dataset (22.3x), which suggests timing or definition differences between our on‑the‑books calculation and the precomputed TTM multiple supplied by third‑party services. Regardless, at an EV/EBITDA near 20x and a P/E near 30x, Copart sits in a valuation band that makes investors especially sensitive to the trajectory of revenue and unit trends.

Finally, macroeconomic backdrop amplified the reaction. With higher‑multiple names broadly vulnerable to slowing macro prints and concerns over consumer mobility or credit conditions, Copart’s small top‑line disappointment became a focal point in a market already primed to reprice growth exposure.

Decomposing the Margin Story: Price, Mix, and Technology#

Copart’s margin expansion is real and traceable. FY2025 gross margin of ~45.18% represents a continuation of multi‑year high‑40s efficiency levels and a meaningful improvement versus earlier years. Management attributes much of this to pricing discipline, better per‑auction realization, and lower per‑transaction cost through investments in technology — specifically the VB3 auction platform and algorithmic pricing initiatives. These investments have raised auction liquidity and improved realized prices per unit, which shows up as stronger gross profit per vehicle.

Scale and mix also play a role. Copart’s global buyer network, combined with cross‑border demand, supports pricing when domestic volumes fluctuate. Higher complexity vehicles (EVs, ADAS‑equipped cars) can command different recovery profiles and salvage economics; Copart’s platform appears to have captured more of the upside from these higher‑value salvage assets while keeping per‑transaction costs under control. The result is operating leverage: operating expenses grew much more slowly than revenue, lifting operating margin to ~36.5% in FY2025.

Sustainability is the next question. Margin gains driven by durable investments (platform enhancements that lower long‑run per‑transaction costs) are more sustainable than one‑time cost saves. Given Copart’s ongoing capex and technology roadmap (capital expenditures were $569 million in FY2025), some of the margin improvement is clearly tied to recurring operational enhancements. The company’s ability to sustain those margins without renewed top‑line growth is limited — pricing and efficiency can blunt revenue softness for a period, but long‑term multiple support requires restoreable growth.

International Growth and Competitive Positioning#

One structural hedge for Copart is international expansion. The dataset shows Copart operating across hundreds of jurisdictions, and international operations contributed meaningfully to FY2025 top‑line growth. Geographic diversification helps smooth domestic cyclicality — when U.S. unit volumes soften, overseas markets can still deliver incremental revenue and benefit from cross‑border buyer demand. Copart’s scale, global buyer network, and logistics footprint strengthen its competitive moat in remarketing and salvage — assets that are not easily replicated by smaller regional players.

That said, international growth is not a frictionless panacea. Local regulatory regimes, reclamation and transport costs, and varying buyer pools mean that margin profiles differ by geography. The financial impact depends on the pace at which Copart can replicate its U.S. operating efficiencies overseas and on how much unit growth those regions deliver. For FY2025 the diversification effect was positive but not enough to fully offset U.S. softness in the quarter.

Competition in salvage and remarketing is real but Copart’s scale and technology provide a clear advantage. Smaller auction houses may compete on price but lack the breadth of buyers and the data‑driven pricing capabilities Copart has invested in. Those advantages support pricing discipline and are a plausible explanation for why the company sustained margin expansion even as volumes decelerated.

Data Discrepancies and How We Treated Them#

During our independent calculations we encountered at least two inconsistencies in the supplied dataset. First, the dataset reports a netDebt value of -2.68B in the balance sheet table for FY2025, while the line items for cash & short‑term investments ($4.79B) and total debt ($103.74MM) imply a net cash position of ~$4.69B. Second, the dataset includes an EV/EBITDA figure of 22.3x in the TTM ratios, while our on‑the‑books EV/EBITDA calculation (market cap + debt - cash) divided by FY2025 EBITDA yields ~19.97x.

When confronted with conflicting data, we prioritized raw balance sheet and income statement line items (cash & short‑term investments, total debt, EBITDA, market capitalization) and performed independent arithmetic to produce our core metrics. That approach is conservative and transparent: derive the metric from constituent line items rather than accept a computed ratio that may incorporate different timing conventions or adjustments. We flag the discrepancies for readers and recommend cross‑checking the company’s SEC filings or investor relations releases for the authoritative presentation (Copart filings)[https://www.sec.gov/edgar/search/].

What This Means For Investors — The Tradeoffs#

Copart’s FY2025 results sharpen the tradeoff investors now face. On one hand, the company demonstrated durable profitability, a strong free‑cash‑flow profile (FCF conversion ~79%), and a substantial net cash position (our calc ~$4.69B) that supports continued investments and optionality. Those are real assets that sustain a quality premium.

On the other hand, revenue momentum shows signs of deceleration: quarterly unit trends softened and Q4 revenues missed consensus narrowly, shifting the debate from execution to growth runway. At current multiples (P/E ~30x, EV/EBITDA ~20x by our calculation), upside depends in part on the market’s belief that Copart can translate its technology investments and international expansion into reaccelerating top‑line growth.

Investors should therefore watch three high‑impact indicators for clarity: quarterly global unit trends and realized price per unit (which drive revenue), the cadence and ROI of technology rollouts (VB3/AI pricing), and management’s capital allocation moves (M&A, buybacks, or increased capex). Each will influence the multiple the market is willing to pay for Copart’s cash flows.

Key Takeaways#

Copart finished FY2025 as a profitable, cash‑generative business with $4.65B in revenue (+9.67%), $1.55B in net income (+13.97%), and $1.23B in free cash flow. The company’s margins expanded and FCF conversion is strong (~79%), giving management flexibility. However, Q4 signs of volume weakness and a narrow revenue miss prompted investor re‑rating because the stock is priced for growth. Our independent arithmetic yields an EV/EBITDA of ~19.97x and a trailing P/E of ~30.45x, figures that highlight how the market’s tolerance for short‑term growth gaps is limited.

For those following [CPRT] closely, the next several quarters of unit trends, realized sale prices, and international growth execution will be decisive: margins can buy time, but sustained reacceleration in revenue is the most direct path to restore multiple expansion.

Appendix — Selected Calculations and Sources#

All calculations above are derived from line items in Copart’s FY2025 financials included in the supplied dataset; where we reference estimates or consensus we use the dataset’s earnings surprises and estimate lines. For authoritative filing text and the company’s management commentary, see Copart investor relations and the company’s SEC filings (Investor Releases)[https://investors.copart.com] (SEC Edgar search)[https://www.sec.gov/edgar/search/].

Important computed figures (Monexa AI calculations): net cash = Cash & Short‑Term Investments ($4.79B) - Total Debt ($103.74MM) = ~$4.69B; FCF conversion = Free Cash Flow ($1.23B) / Net Income ($1.55B) = ~79.35%; EV/EBITDA = (Market Cap $46.82B + Total Debt $0.10B - Cash & Investments $4.79B) / EBITDA $2.11B = ~19.97x.

(Primary dataset: Copart FY2025 financial tables provided to Monexa AI; company filings and releases: Copart investor relations and SEC filings)[https://investors.copart.com][https://www.sec.gov/edgar/search/].