Insider Move: William Nash Exercises Options, Realizing $1.94M At CarMax

A significant insider transaction involving the exercise of company stock options was reported on December 28, by William Nash, President & CEO at CarMax KMX, as per the latest SEC filing.

What Happened: A Form 4 filing with the U.S. Securities and Exchange Commission on Thursday revealed that Nash, President & CEO at CarMax in the Consumer Discretionary sector, exercised stock options for 102,775 shares of KMX stock. The exercise price of the options was $58.38 per share.

CarMax shares are currently trading down by 0.8%, with a current price of $77.22 as of Friday morning. This brings the total value of Nash's 102,775 shares to $1,936,280.

About CarMax

CarMax sells, finances, and services used and new cars through a chain of about 240 used retail stores. It was formed in 1993 as a unit of Circuit City and spun off into an independent company in late 2002. Used-vehicle sales typically account for about 83% of revenue (78% in fiscal 2023 due to the chip shortage) and wholesale about 13% (20% in fiscal 2023), with the remaining portion composed of extended service plans and repair. In fiscal 2023, the company retailed and wholesaled 807,823, and 585,071 used vehicles, respectively. CarMax is the largest used-vehicle retailer in the U.S. but still estimates that it has only about 4% U.S. market share of vehicles 0-10 years old in 2022. It seeks over 5% share by the end of calendar 2025. CarMax is based in Richmond, Virginia.

CarMax: Delving into Financials

Decline in Revenue: Over the 3 months period, CarMax faced challenges, resulting in a decline of approximately -13.08% in revenue growth as of 30 November, 2023. This signifies a reduction in the company's top-line earnings. As compared to competitors, the company encountered difficulties, with a growth rate lower than the average among peers in the Consumer Discretionary sector.

Profitability Metrics: Unlocking Value

• Gross Margin: The company shows a low gross margin of 9.97%, indicating concerns regarding cost management and overall profitability relative to its industry counterparts.

• Earnings per Share (EPS): CarMax's EPS lags behind the industry average, indicating concerns and potential challenges with a current EPS of 0.52.

Debt Management: CarMax's debt-to-equity ratio is below industry norms, indicating a sound financial structure with a ratio of 3.22.

Valuation Overview:

• Price to Earnings (P/E) Ratio: With a higher-than-average P/E ratio of 24.87, CarMax's stock is perceived as being overvalued in the market.

• Price to Sales (P/S) Ratio: The Price to Sales ratio is 0.46, which is lower than the industry average. This suggests a possible undervaluation based on sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): With an EV/EBITDA ratio of 19.35, the company's market valuation exceeds industry averages.

Market Capitalization Highlights: Above the industry average, the company's market capitalization signifies a significant scale, indicating strong confidence and market prominence.

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Uncovering the Importance of Insider Activity

Insider transactions serve as a piece of the puzzle in investment decisions, rather than the entire picture.

In the context of legal matters, the term "insider" refers to any officer, director, or beneficial owner holding more than ten percent of a company's equity securities, as outlined by Section 12 of the Securities Exchange Act of 1934. This includes executives in the c-suite and significant hedge funds. Such insiders are obligated to report their transactions through a Form 4 filing, which must be completed within two business days of the transaction.

Pointing towards optimism, a company insider's new purchase signals their positive anticipation for the stock to rise.

Despite insider sells not always signaling a bearish sentiment, they can be driven by various factors.

A Closer Look at Important Transaction Codes

When analyzing transactions, investors tend to focus on those in the open market, detailed in Table I of the Form 4 filing. A P in Box 3 denotes a purchase,while S signifies a sale. Transaction code C signals the conversion of an option, and transaction code A denotes a grant, award, or other acquisition of securities from the company.

Check Out The Full List Of CarMax's Insider Trades.

This article was generated by Benzinga's automated content engine and reviewed by an editor.