For over four decades, Copart has built a unique business model that combines a digital platform with physical assets that are exceptionally difficult to replicate at a global scale. The company operates as critical infrastructure for the world’s leading insurers, managing a vast network of dismantling facilities alongside a proprietary auction system that enables the rapid and efficient processing of millions of totaled vehicles each year, while maximizing residual value recovery. The result is a business that consistently generates free cash flow margins in excess of 35%, returns on invested capital above 25%, and a revenue base characterized by a high degree of recurrence and predictability, even across adverse macroeconomic environments. Over time, Copart has successfully transitioned from a traditional dismantling operator into the dominant player in an industry that has evolved toward duopolistic dynamics with substantial barriers to entry.
However, the company’s current situation raises several questions that warrant closer examination. The stock has declined by more than 40% from its all-time high, amid a slowdown in operating performance, downward revisions to some analysts’ forecasts, and the perceived strengthening of RB Global following its acquisition of IAA. Together, these factors have led the market to reassess whether Copart’s competitive position remains as robust as it was widely assumed to be just a few quarters ago.
At the same time, the debate surrounding long-term technological risks is gaining momentum. The potential acceleration in the adoption of Advanced Driver Assistance Systems (ADAS), and the eventual deployment of autonomous vehicles at scale, could structurally reduce accident frequency and, by extension, the volume of damaged vehicles that underpin Copart’s business model. For a company whose economics depend almost entirely on claim volumes, it is reasonable to question whether these developments represent a risk capable of permanently altering the model, or whether such concerns are overstated.
In this analysis, I aim to examine these issues in depth, focusing not only on the disruptive threats facing the business but also on potential tailwinds that may be underestimated by the market, as well as the implications of both for Copart’s current valuation. The objective is not to forecast a specific outcome, but rather to assess whether Copart’s return profile remains as exceptional as it appears and, consequently, whether the stock may be trading at a reasonable valuation for investors willing to look beyond what many perceive as near-term noise.