Options Movement At CarMax: John Stuckey III Exercises Worth $388K

A substantial insider activity was disclosed on July 16, as III, SVP at CarMax KMX, reported the exercise of a large sell of company stock options.

What Happened: In an insider options sale disclosed in a Form 4 filing on Tuesday with the U.S. Securities and Exchange Commission, III, SVP at CarMax, exercised stock options for 19,673 shares of KMX. The transaction value amounted to $388,738.

During Wednesday's morning session, CarMax shares down by 1.45%, currently priced at $82.8. Considering the current price, III's 19,673 shares have a total value of $388,738.

Discovering CarMax: A Closer Look

CarMax sells, finances, and services used and new cars through a chain of around 250 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 (79% in fiscal 2024 due to the chip shortage) and wholesale about 13% (19% in fiscal 2024), with the remaining portion composed of extended service plans and repair. In fiscal 2024, the company retailed and wholesaled 765,572, and 546,331 used vehicles, respectively. CarMax is the largest used-vehicle retailer in the US but still estimates that it had only about 3.7% US market share of vehicles 0-10 years old in 2023. It seeks over 5% share a few years from now. CarMax is based in Richmond, Virginia.

Breaking Down CarMax's Financial Performance

Revenue Growth: CarMax's revenue growth over a period of 3 months has faced challenges. As of 31 May, 2024, the company experienced a revenue decline of approximately -7.46%. This indicates a decrease in the company's top-line earnings. As compared to its peers, the revenue growth lags behind its industry peers. The company achieved a growth rate lower than the average among peers in Consumer Discretionary sector.

Exploring Profitability:

• Gross Margin: The company shows a low gross margin of 11.13%, indicating concerns regarding cost management and overall profitability relative to its industry counterparts.

• Earnings per Share (EPS): With an EPS below industry norms, CarMax exhibits below-average bottom-line performance with a current EPS of 0.97.

Debt Management: CarMax's debt-to-equity ratio is below the industry average. With a ratio of 3.13, the company relies less on debt financing, maintaining a healthier balance between debt and equity, which can be viewed positively by investors.

Understanding Financial Valuation:

• Price to Earnings (P/E) Ratio: CarMax's current Price to Earnings (P/E) ratio of 32.95 is higher than the industry average, indicating that the stock may be overvalued according to market sentiment.

• Price to Sales (P/S) Ratio: With a P/S ratio of 0.51 below industry standards, the stock shows potential undervaluation, making it an appealing investment option for those focusing on sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): A high EV/EBITDA ratio of 19.97 positions the company as being more valued compared to industry benchmarks.

Market Capitalization Analysis: The company's market capitalization surpasses industry averages, showcasing a dominant size relative to peers and suggesting a strong market position.

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Why Insider Transactions Are Important

Insider transactions, although significant, should be considered within the larger context of market analysis and trends.

When discussing 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 stipulated in Section 12 of the Securities Exchange Act of 1934. This includes executives in the c-suite and significant hedge funds. Such insiders are required to report their transactions through a Form 4 filing, which must be completed within two business days of the transaction.

A new purchase by a company insider is a indication that they anticipate the stock will rise.

On the other hand, insider sells may not necessarily indicate a bearish view and can be motivated by various factors.

Unlocking the Meaning of Transaction Codes

Taking a closer look at transactions, investors often prioritize those unfolding in the open market, meticulously cataloged in Table I of the Form 4 filing. A P in Box 3 denotes a purchase, while S signifies a sale. Transaction code C denotes the conversion of an option, and transaction code A signifies 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.