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1. Company Snapshot

1.a. Company Description

CarMax, Inc., together with its subsidiaries, operates as a retailer of used vehicles in the United States.The company operates through two segments, CarMax Sales Operations and CarMax Auto Finance.It offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles; and extended protection plans to customers at the time of sale, as well as sells vehicles that are approximately 10 years old and has more than 100,000 miles through wholesale auctions.


The company also provides reconditioning and vehicle repair services; and financing alternatives for retail customers across a range of credit spectrum through its CarMax Auto Finance and arrangements with various financial institutions.As of February 28, 2022, it operated approximately 230 used car stores.CarMax, Inc.


was founded in 1993 and is based in Richmond, Virginia.

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1.b. Last Insights on KMX

CarMax, Inc.'s recent performance has been negatively impacted by the sudden termination of CEO Bill Nash, effective December 1, 2025, and the company's preliminary Q3 2026 financial results, which forecast a comparable store unit decrease of 8%-12% and net EPS in the range of $0.18-$0.36. This was significantly lower than analysts' expectations of $0.69. Additionally, a surprise surge in the provision for loan losses within the company's CarMax Auto Finance (CAF) segment led to a sharp sell-off in September 2025. A class action lawsuit has been filed against the company for securities fraud.

1.c. Company Highlights

2. CarMax's Q2 FY2026 Earnings: A Challenging Quarter

CarMax reported a decline in earnings per share to $0.64, missing estimates of $1.03. Total sales reached $6.6 billion, down 6% year-over-year, with used unit sales declining by 5.4%. The average selling price dropped by $250 per unit. Retail gross profit per used unit remained flat year-over-year but declined sequentially by $200. The company's adjusted pricing strategy aimed to drive sales, and they slowed down buy activity to balance inventory levels.

Publication Date: Sep -26

📋 Highlights
  • Decline in Sales and Profitability:: Total sales fell to $6.6B (-6% YoY), with used unit sales down 5.4% and average selling price dropping $250, while retail gross profit per used unit decreased $200 sequentially.
  • Inventory Depreciation Impact:: Earnings were below expectations due to $1B inventory depreciation driven by tariff speculation and demand pull-forward into Q1.
  • CAF Performance:: CarMax Auto Finance originated $2B in loans (42.6% penetration) but income fell to $103M (-11% YoY), despite a 50 bps net interest margin increase to 6.6%.
  • Cost Reductions and Reinvestment:: $150M SG&A cuts over 18 months aim to offset inflation, with savings reinvested in pricing competitiveness and marketing ($200/car for pricing)."
  • Inventory and Credit Strategy:: Shift toward older inventory and cautious expansion into upper-tier second credit segment, avoiding deep subprime, while maintaining healthy inventory levels.

Operational Challenges

The company attributed the challenges to inventory buildup ahead of the second quarter due to tariff speculation, leading to inventory depreciation during the quarter, and a pull-forward of demand into the first quarter. To address these issues, CarMax lowered retail margins and adjusted their inventory management, which has shown positive results in terms of improved price competitiveness and inventory position.

CarMax Auto Finance (CAF) Performance

CAF originated over $2 billion in loans, achieving a penetration rate of 42.6%. CAF income for the quarter was $103 million, down from $116 million last year. Net interest margin on the portfolio was 6.6%, up 50 basis points year-over-year. The company expects CAF income to be slightly down from the previous year for fiscal year 2026.

Future Outlook and Cost Reduction Initiatives

CarMax plans to increase marketing spend in the back half of the year to support the new "Wanna Drive" brand positioning. The company expects to achieve at least $150 million in SG&A reductions over the next 18 months through initiatives such as technology modernization, process automation, and cost optimization. These savings will offset inflationary pressures and provide flexibility for reinvestment. With a P/E Ratio of 12.98 and an ROE of 8.36%, the market is pricing in a certain level of growth and profitability.

Valuation and Growth Prospects

The market is currently pricing in a certain level of growth and profitability, as reflected in the P/E Ratio of 12.98 and an ROE of 8.36%. The company's plans to reinvest some of the savings back into the business while also taking some to the bottom line are expected to drive future growth. Analysts estimate next year's revenue growth at 2.6%, indicating a moderate growth outlook.

3. NewsRoom

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Levi & Korsinsky Announces the Filing of a Securities Class Action on Behalf of CarMax, Inc. (KMX) Shareholders

Dec -04

Source: globenewswire.com

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INVESTOR ALERT: The CarMax, Inc. Securities Fraud Class Action is Pending, Investors Urged to Contact BFA Law by January 2 Deadline

Dec -04

Source: newsfilecorp.com

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KMX Investor Alert: Hagens Berman Notifies Investors of Suit Over CarMax's Alleged “Temporary Demand Pull-Forward” and Loan Portfolio Risk

Dec -04

Source: globenewswire.com

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KMX Investors Have Opportunity to Lead CarMax, Inc. Securities Fraud Lawsuit with the Schall Law Firm

Dec -04

Source: globenewswire.com

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KMX ANNOUNCEMENT: Kessler Topaz Meltzer & Check, LLP Notifies Investors of a Class Action Lawsuit Against CarMax, Inc. (KMX)

Dec -04

Source: globenewswire.com

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CarMax Shareholder Alert: ClaimsFiler Reminds Investors With Losses In Excess Of $100,000 Of Lead Plaintiff Deadline In Class Action Lawsuits Against CarMax, Inc. - KMX

Dec -04

Source: globenewswire.com

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Class Action Filed Against CarMax, Inc. (KMX) - January 2, 2026 Deadline to Join - Contact The Gross Law Firm

Dec -04

Source: prnewswire.com

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CarMax, Inc. Sued for Securities Law Violations - Contact the DJS Law Group to Discuss Your Rights - KMX

Dec -04

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.03%)

6. Segments

CarMax Sales

Expected Growth: 9.03%

CarMax's 9.03% sales growth is driven by increasing consumer preference for used cars, expansion of online sales channels, and strategic store openings in underserved markets. Additionally, the company's focus on providing a hassle-free car buying experience, transparent pricing, and a wide selection of vehicles also contribute to its growth.

Other

Expected Growth: 8.5%

CarMax's 8.5% growth is driven by increasing used car sales, expansion of online retail platform, and growing demand for omnichannel car buying experience. Additionally, the company's focus on providing transparent and hassle-free car buying experience, along with its diversified revenue streams, contributes to its growth momentum.

7. Detailed Products

Used Vehicles

CarMax sells a wide range of used vehicles from various manufacturers, including cars, trucks, SUVs, and vans.

Certified Vehicles

CarMax offers certified pre-owned vehicles that have undergone rigorous inspections and come with warranties.

Extended Service Plans

CarMax offers extended service plans that provide additional warranty coverage beyond the manufacturer's warranty.

Financing and Insurance

CarMax provides financing options and insurance products to help customers purchase and protect their vehicles.

Appraisal and Trade-In Services

CarMax offers appraisal and trade-in services, allowing customers to sell their vehicles or trade them in for a new one.

Vehicle Inspection and Repair Services

CarMax provides vehicle inspection and repair services to ensure vehicles are in good condition.

8. CarMax, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

CarMax faces moderate threat from substitutes, as customers can opt for private-party sales, online marketplaces, or other used car retailers. However, CarMax's unique business model and customer experience help mitigate this threat.

Bargaining Power Of Customers

CarMax's customers have limited bargaining power due to the company's large market share and lack of price transparency in the used car market. Additionally, CarMax's no-haggle pricing policy reduces customers' ability to negotiate prices.

Bargaining Power Of Suppliers

CarMax's suppliers, primarily auto auctions and dealerships, have limited bargaining power due to the company's large scale and diversified supply chain. CarMax's ability to source vehicles from various channels also reduces supplier power.

Threat Of New Entrants

The threat of new entrants is low due to the significant capital requirements and regulatory hurdles involved in entering the used car retail market. CarMax's established brand and economies of scale also create barriers to entry.

Intensity Of Rivalry

The used car retail market is highly competitive, with many established players and online marketplaces. CarMax faces intense rivalry from companies like AutoNation, Penske Automotive, and online platforms like Cars.com and Autotrader.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 75.62%
Debt Cost 5.23%
Equity Weight 24.38%
Equity Cost 12.17%
WACC 6.92%
Leverage 310.11%

11. Quality Control: CarMax, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Penske Automotive Group

A-Score: 6.5/10

Value: 6.9

Growth: 7.1

Quality: 4.8

Yield: 5.0

Momentum: 7.0

Volatility: 8.0

1-Year Total Return ->

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Asbury Automotive Group

A-Score: 5.4/10

Value: 7.9

Growth: 7.4

Quality: 4.0

Yield: 0.0

Momentum: 7.0

Volatility: 6.0

1-Year Total Return ->

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Group 1 Automotive

A-Score: 5.4/10

Value: 6.6

Growth: 7.8

Quality: 3.5

Yield: 0.0

Momentum: 8.0

Volatility: 6.3

1-Year Total Return ->

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Lithia Motors

A-Score: 5.3/10

Value: 6.7

Growth: 6.7

Quality: 5.2

Yield: 1.0

Momentum: 6.0

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
CarMax

A-Score: 3.4/10

Value: 6.8

Growth: 5.6

Quality: 2.5

Yield: 0.0

Momentum: 1.0

Volatility: 4.7

1-Year Total Return ->

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ACV Auctions

A-Score: 3.4/10

Value: 6.5

Growth: 5.4

Quality: 4.4

Yield: 0.0

Momentum: 0.5

Volatility: 3.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

38.82$

Current Price

38.82$

Potential

-0.00%

Expected Cash-Flows