Copart

Copart benefits from multiple reinforcing moats. Network effects: a large, global buyer base bids on insurance‑sourced inventory, improving sell‑through and returns; management cites ~1 million members across 185+ countries and over 4 million units sold in the last year.

Switching costs: insurers value end‑to‑end services, title processing, logistics, and catastrophe response, and often integrate operationally under multi‑site agreements. Efficient scale and cost advantages: Copart’s dense, largely owned yard network lowers transport, cycle times, and storage costs and is expensive for new entrants to replicate.

Technology: its VB3 auction platform, C360 imaging and mobile apps enhance merchandising and conversion. In the UK, the CMA described Copart as “market leader by a significant distance,” which corroborates its competitive edge.

Principal threats are from long‑term changes in accident rates (ADAS), insurer fee pressure, regulatory changes that limit who can buy salvage, and continued competitive responses from RB Global’s IAA, but the breadth and durability of Copart’s advantages argue for a strong moat.

Pricing power shows up in high and rising service revenues per vehicle, very strong gross and operating margins, and the ability to adjust fee structures over time. FY2025 service revenues grew 11.4% to ~$3.97B, with U.S. up 10.4% and International up 18.9%. Operating margin for FY2025 was ~36.5%.

While insurers can push back on fee increases and competitive dynamics with IAA remain, Copart’s marketplace liquidity and service bundle create room to monetize value.

Customer‑facing reviews highlight pain points around fees and vehicle disclosures, which is a reputational consideration, but these have not prevented sustained growth and retention of major sellers.

Copart’s revenue and cash flow have compounded steadily over long periods, supported by recurring salvage supply from insurers and a large, diversified buyer base. Ten‑year trends in revenue and free cash flow show consistent growth with periodic weather‑related spikes.

Management notes that total loss frequency has trended upward over decades, aided by higher repair costs and used‑car values, while the U.S. car parc continues to age (average age ~12.8 years in 2025).

Near‑term variability stems from used‑car price swings, catastrophe activity, and macro cycles, but overall the model is less cyclical than traditional auto retailers and remains relatively predictable.

Financial strength is exceptional.

As of July 31, 2025, Copart reported $2.78B in cash and equivalents plus ~$2.01B in held‑to‑maturity securities, minimal lease liabilities ($104M total), no long‑term debt, and no borrowings under its $1.25B revolver maturing December 2026. FY2025 operating cash flow was ~$1.80B vs. capex of ~$0.57B, yielding ~26% FCF margin on revenue.

Liquidity supports continued land purchases, facility expansion, technology investment, and selective M&A without balance‑sheet risk.

Management prioritizes reinvestment in capacity, owned real estate, and software that should widen the moat.

Capex is predominantly growth‑oriented (land, facilities, software, equipment), with disciplined use of bolt‑on deals such as Hills Motors in the UK (green parts) and a controlling stake in Purple Wave (heavy equipment), which broaden the asset‑disposal ecosystem. Stock‑based compensation is modest (~$38M in FY2025).

Copart has an authorized repurchase program but has not repurchased stock in recent years, opting to deploy capital for growth. We view this as rational given high reinvestment returns and the strategic value of yard density.

Leadership continuity and alignment are strengths. The 2025 10‑K identifies Jeffrey Liaw as CEO, with A. Jayson Adair as Executive Chairman and founder Willis J. Johnson as Chairman of the Board, signaling a founder‑influenced ownership and governance culture focused on long‑term value creation.

Management commentary and actions reflect operational discipline, conservative financing, and steady international expansion. No single customer accounted for more than 10% of revenue in FY2025, and 81% of vehicles came from insurance sellers, indicating resilient franchise relationships.