CarMax (KMX) Valuation Check After Recent Share Price Swings And Conflicting Fair Value Estimates

Simply Wall St.01-27 07:36

AdvertisementWhy CarMax Stock Is On Investors’ Radar Today CarMax (KMX) is drawing fresh attention after a period of mixed share performance, with a decline over the past year but gains in the month ...

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For investors tracking used car retail and auto finance, this recent swing in returns is encouraging some to revisit the company’s current valuation, recent financial metrics, and how its business model is holding up in a changing used vehicle market. See our latest analysis for CarMax. Recent trading has been choppy, with a 1-day share price return of a 2.48% decline and a 7-day share price return of a 7.56% decline, contrasting with a 30-day share price return of a 14.95% gain. However, the 1-year total shareholder return of a 46.60% decline highlights that any near-term momentum is still set against a weaker long-term experience. If you are weighing CarMax against other auto names, this is a good moment to scan how peers are trading using our auto manufacturers. With the share price around US$45.14, a reported intrinsic discount of about 30%, and a weak 1 year and multi year total return, you have to ask: is this a reset entry point, or is the market already pricing in any future growth? Most Popular Narrative: 18% Overvalued The most followed narrative pegs CarMax’s fair value at about $38.31, which sits below the last close of $45.14 and raises clear questions about upside.  CarMax's initiative to broaden its full credit spectrum lending capabilities through CarMax Auto Finance (CAF) is expected to increase CAF income and net interest margins over time. This initiative aims to capture more sales and improve financing income, impacting earnings positively.  Read the complete narrative. Want the full story behind that valuation gap? The narrative leans on moderate earnings growth, steady margins, and a compressed future earnings multiple. The tension, and your key decision point, sits in how those moving parts line up against auto credit risk. Result: Fair Value of $38.31 (OVERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, you still have to weigh pressure on wholesale margins and higher loan loss provisions, either of which could quickly challenge this overvaluation story. Find out about the key risks to this CarMax narrative. Another View: Cash Flows Point In The Opposite Direction Here is where things get interesting. While the narrative fair value sits at about $38.31 and flags CarMax as overvalued, our DCF model based on future cash flows points to a fair value closer to $64.56, which makes the current $45.14 share price look undervalued instead. For you, that gap is really about which set of assumptions you trust more: cautious earnings and margin expectations, or a longer term cash flow outlook that paints a more forgiving picture, and which one fits better with your own view of auto credit risk and used car demand? Look into how the SWS DCF model arrives at its fair value. KMX Discounted Cash Flow as at Jan 2026Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CarMax for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 884 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.  Build Your Own CarMax Narrative If you look at the numbers and come to a different conclusion, or simply prefer to run your own checks, you can build a custom thesis in minutes with Do it your way. A great starting point for your CarMax research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision. Looking for more investment ideas? If you only stop at CarMax, you could miss other opportunities entirely. Widen your view and let the screener surface ideas you might not expect.  Spot potential value opportunities early by scanning these 884 undervalued stocks based on cash flows that line up with your own view on cash flows and pricing. Ride powerful tech trends by checking out these 23 AI penny stocks that tie real business models to artificial intelligence themes. Boost your income focus by reviewing these 13 dividend stocks with yields > 3% that already clear a 3% yield hurdle.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: AI Stock Screener & AlertsOur new AI Stock Screener scans the market every day to uncover opportunities.• Dividend Powerhouses (3%+ Yield)• Undervalued Small Caps with Insider Buying• High growth Tech and AI CompaniesOr build your own from over 50 metrics.Explore Now for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. 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