Witnessing An Insider Decision, Enrique MayorMora Exercises Options Valued At $206K At CarMax

Disclosed in a recent SEC filing on July 17, MayorMora, EVP & CFO at CarMax KMX, made a noteworthy transaction involving the exercise of company stock options.

What Happened: MayorMora, EVP & CFO at CarMax, made a strategic move by exercising stock options for 11,150 shares of KMX as detailed in a Form 4 filing on Wednesday with the U.S. Securities and Exchange Commission. The transaction value amounted to $206,051.

The Thursday morning market activity shows CarMax shares down by 1.66%, trading at $81.52. This implies a total value of $206,051 for MayorMora's 11,150 shares.

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.

CarMax's Financial Performance

Revenue Challenges: CarMax's revenue growth over 3 months faced difficulties. As of 31 May, 2024, the company experienced a decline of approximately -7.46%. This indicates a decrease in 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.

Key Insights into Profitability Metrics:

• 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: The company maintains a balanced debt approach with a debt-to-equity ratio below industry norms, standing at 3.13.

Market Valuation:

• Price to Earnings (P/E) Ratio: A higher-than-average P/E ratio of 32.51 suggests caution, as the stock may be overvalued in the eyes of investors.

• Price to Sales (P/S) Ratio: With a lower-than-average P/S ratio of 0.51, 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 impressive EV/EBITDA ratio of 19.86, CarMax demonstrates exemplary market valuation, surpassing industry averages.

Market Capitalization Analysis: With an elevated market capitalization, the company stands out above industry averages, showcasing substantial size and market acknowledgment.

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Why Insider Activity Matters in Finance

Investors should view insider transactions as part of a multifaceted analysis and not rely solely on them for decision-making.

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.

A Deep Dive into Insider Transaction Codes

For investors, a primary focus lies on transactions occurring in the open market, as indicated 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.