Insider Activity Update: Jon Daniels Executes Options Exercise, Resulting In $188K At CarMax

Disclosed in a recent SEC filing on December 28, Daniels, SVP at CarMax KMX, made a noteworthy transaction involving the exercise of company stock options.

What Happened: A notable Form 4 filing on Thursday with the U.S. Securities and Exchange Commission revealed that Daniels, SVP at CarMax, exercised stock options for 10,000 shares of KMX, resulting in a transaction value of $188,399.

As of Friday morning, CarMax shares are down by 0.8%, with a current price of $77.22. This implies that Daniels's 10,000 shares have a value of $188,399.

Delving into CarMax's Background

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.

Unraveling the Financial Story of CarMax

Revenue Growth: CarMax's revenue growth over a period of 3 months has faced challenges. As of 30 November, 2023, the company experienced a revenue decline of approximately -13.08%. This indicates a decrease in the company's top-line earnings. In comparison to its industry peers, the company trails behind with a growth rate lower than the average among peers in the Consumer Discretionary sector.

Holistic Profitability Examination:

• Gross Margin: The company issues a cost efficiency warning with a low gross margin of 9.97%, indicating potential difficulties in maintaining profitability compared to its peers.

• Earnings per Share (EPS): CarMax's EPS is below the industry average. The company faced challenges with a current EPS of 0.52. This suggests a potential decline in earnings.

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

Assessing Valuation Metrics:

• Price to Earnings (P/E) Ratio: CarMax's stock is currently priced at a premium level, as reflected in the higher-than-average P/E ratio of 24.87.

• Price to Sales (P/S) Ratio: With a lower-than-average P/S ratio of 0.46, the stock presents an attractive valuation, potentially signaling a buying opportunity for investors interested in 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: Boasting an elevated market capitalization, the company surpasses industry averages. This signals substantial size and strong market recognition.

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The Importance of Insider Transactions

Considering insider transactions is valuable, but it's crucial to evaluate them in conjunction with other investment factors.

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.

Exploring Key Transaction Codes

Surveying the realm of stock transactions, investors often give prominence to those unfolding in the open market, systematically detailed in Table I of the Form 4 filing. A P in Box 3 indicates a purchase, while S signifies a sale. Transaction code C denotes 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.