CarMax Is Worthy of Consideration

My purpose in this blog is to offer information I am using to seek ways to make significant gifts to ministry causes on my heart. The best gift one can make is the gift of appreciated stocks. So if we are actually able to buy stock, have it appreciate over time beyond a year and not sell but give the stock we are able to do more. Of course that is assuming appreciation. So, I seek to use a proven method to analyze companies to give me the best opportunity for growth. It is a tool used in investment clubs since 1951 called the Stock Selection Guide. I have found another company for your consideration that meets the strict guidelines of the SSG.

Ticker: KMX 

CarMax is a $15 Billion company making it Large Capitalization in the Better Investing rankings. 

Sales grew at 11.6% over five years and earnings at a healthy 15.4%. Pre-tax profit on sales has been a steady 6.58% over that same period and earnings on equity was 16.38%. Its debt to capital is at 71% but car companies are always high in floor plan debt. In most companies we look for 33% or less. 

It is the leader in the industry over AutoNation, Group 1 Automotive and Penske Automotive Group in sales and earnings lag the group average some. 

It is currently in the high of the BUY zone at $56.5. That zone is $42-58. The upside/downside is 3.6 to 1.

CarMax is the nations largest retailer of used cars. It has 158 lots in 60 cities. It also has a profitable financing arm. In 2015 the average price per car was $19,917 and average profit per car of $2,109 a 10.6% margin. 

Positives:

1. It has enhanced its web sales development and has a major competitive advantage in this venue.
2. It has a wholesale vehicle auction that is 14.5% of sales. This allows an outlet for trade-ins and slower merchandise.
3. Greater number of drivers in the future and gas prices make automobiles more attractive. 

Negatives:

1. Car business is cyclical.
2. New cars are sometime easier to buy. 
3. Pricing has been more difficult and margins are trending lower

We are going to add to our portfolio 100 shares of KMX @ $54.44 or $5,444.00 minus $7 transaction fee so cost is $5,451.00. 

LCI $3,000 value ... $3,238 cost basis ... -240.00

KMX $5,444 value ... $5,451.00 cost basis ... -7.00

Sent from my iPhonehttps://www.carmax.com