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CarMax (KMX) Gains As Market Dips: What You Should Know

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CarMax (KMX - Free Report) closed the most recent trading day at $70.48, moving +0.64% from the previous trading session. The stock outpaced the S&P 500's daily loss of 0.04%. At the same time, the Dow lost 0.14%, and the tech-heavy Nasdaq gained 2.14%.

Prior to today's trading, shares of the used car dealership chain had gained 8.95% over the past month. This has outpaced the Retail-Wholesale sector's gain of 4.29% and the S&P 500's gain of 5.1% in that time.

Wall Street will be looking for positivity from CarMax as it approaches its next earnings report date. In that report, analysts expect CarMax to post earnings of $0.76 per share. This would mark a year-over-year decline of 51.28%. Our most recent consensus estimate is calling for quarterly revenue of $7.17 billion, down 23.02% from the year-ago period.

KMX's full-year Zacks Consensus Estimates are calling for earnings of $2.35 per share and revenue of $26.63 billion. These results would represent year-over-year changes of -22.44% and -10.28%, respectively.

Any recent changes to analyst estimates for CarMax should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 16.7% lower. CarMax is currently a Zacks Rank #3 (Hold).

Valuation is also important, so investors should note that CarMax has a Forward P/E ratio of 29.75 right now. This represents a premium compared to its industry's average Forward P/E of 24.84.

Also, we should mention that KMX has a PEG ratio of 1.62. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. KMX's industry had an average PEG ratio of 1.72 as of yesterday's close.

The Automotive - Retail and Wholesale - Parts industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 21, which puts it in the top 9% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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