Back to top

Image: Bigstock

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

Read MoreHide Full Article

In the latest trading session, CarMax (KMX - Free Report) closed at $99.74, marking a +1.78% move from the previous day. This change outpaced the S&P 500's 0.05% gain on the day. At the same time, the Dow added 0.11%, and the tech-heavy Nasdaq gained 0.11%.

Heading into today, shares of the used car dealership chain had gained 5.68% over the past month, outpacing the Retail-Wholesale sector's gain of 1.18% and the S&P 500's gain of 4.32% in that time.

Investors will be hoping for strength from KMX as it approaches its next earnings release. In that report, analysts expect KMX to post earnings of $1.14 per share. This would mark year-over-year growth of 4.59%. Meanwhile, our latest consensus estimate is calling for revenue of $4.62 billion, up 7.63% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.29 per share and revenue of $19.76 billion, which would represent changes of +10.44% and +8.73%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for KMX. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. 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 remained stagnant. KMX is currently a Zacks Rank #2 (Buy).

Valuation is also important, so investors should note that KMX has a Forward P/E ratio of 18.54 right now. Its industry sports an average Forward P/E of 19.52, so we one might conclude that KMX is trading at a discount comparatively.

We can also see that KMX currently has a PEG ratio of 1.47. 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. The Automotive - Retail and Wholesale - Parts was holding an average PEG ratio of 1.62 at yesterday's closing price.

The Automotive - Retail and Wholesale - Parts industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 28, putting it in the top 11% 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


CarMax, Inc. (KMX) - free report >>

Published in