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CarMax (KMX) Outpaces Stock Market Gains: What You Should Know

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CarMax (KMX - Free Report) closed the most recent trading day at $71.70, moving +0.76% from the previous trading session. The stock outpaced the S&P 500's daily gain of 0.3%. Elsewhere, the Dow gained 0.14%, while the tech-heavy Nasdaq added 5.74%.

Coming into today, shares of the used car dealership chain had gained 2.45% in the past month. In that same time, the Retail-Wholesale sector gained 3.51%, while the S&P 500 gained 0.85%.

Investors will be hoping for strength from CarMax as it approaches its next earnings release. The company is expected to report EPS of $0.73, down 53.21% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $7.17 billion, down 23.02% from the year-ago period.

KMX's full-year Zacks Consensus Estimates are calling for earnings of $2.26 per share and revenue of $26.63 billion. These results would represent year-over-year changes of -25.41% and -10.28%, respectively.

Investors might also notice recent changes to analyst estimates for CarMax. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

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 16.58% lower. CarMax is currently sporting a Zacks Rank of #3 (Hold).

Digging into valuation, CarMax currently has a Forward P/E ratio of 31.5. This valuation marks a premium compared to its industry's average Forward P/E of 25.92.

Also, we should mention that KMX has a PEG ratio of 1.72. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. KMX's industry had an average PEG ratio of 1.8 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 76, which puts it in the top 31% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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