Major Decision: Jon Daniels Exercises Options, Realizing $833K At CarMax

A large exercise of company stock options by Jon Daniels, SVP at CarMax KMX was disclosed in a new SEC filing on December 26, as part of an insider exercise.

What Happened: In an insider options sale disclosed in a Form 4 filing on Thursday with the U.S. Securities and Exchange Commission, Daniels, SVP at CarMax, exercised stock options for 37,845 shares of KMX. The transaction value amounted to $833,914.

During Friday's morning session, CarMax shares down by 0.11%, currently priced at $85.08. Considering the current price, Daniels's 37,845 shares have a total value of $833,914.

All You Need to Know About CarMax

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.

Financial Insights: CarMax

Negative Revenue Trend: Examining CarMax's financials over 3 months reveals challenges. As of 30 November, 2024, the company experienced a decline of approximately -11.27% in revenue growth, reflecting a decrease in 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.

Navigating Financial Profits:

• Gross Margin: The company faces challenges with a low gross margin of 10.89%, suggesting potential difficulties in cost control and profitability compared to its peers.

• Earnings per Share (EPS): With an EPS below industry norms, CarMax exhibits below-average bottom-line performance with a current EPS of 0.81.

Debt Management: CarMax's debt-to-equity ratio is below the industry average. With a ratio of 3.09, the company relies less on debt financing, maintaining a healthier balance between debt and equity, which can be viewed positively by investors.

Market Valuation:

• Price to Earnings (P/E) Ratio: The current Price to Earnings ratio of 28.97 is higher than the industry average, indicating the stock is priced at a premium level according to the market sentiment.

• Price to Sales (P/S) Ratio: The P/S ratio of 0.51 is lower than the industry average, implying a discounted valuation for CarMax's stock in relation to sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): At 18.22, the company's EV/EBITDA ratio outperforms industry norms, reflecting positive market perception. This positioning indicates optimistic expectations for the company's future performance.

Market Capitalization: Exceeding industry standards, the company's market capitalization places it above industry average in size relative to peers. This emphasizes its significant scale and robust market position.

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Why Pay Attention to Insider Transactions

While insider transactions provide valuable information, they should be part of a broader analysis in making investment decisions.

In legal terms, an "insider" refers to any officer, director, or beneficial owner of more than ten percent of a company's equity securities registered under Section 12 of the Securities Exchange Act of 1934. This can include executives in the c-suite and large hedge funds. These insiders are required to let the public know of their transactions via a Form 4 filing, which must be filed within two business days of the transaction.

When a company insider makes a new purchase, that is an indication that they expect the stock to rise.

Insider sells, on the other hand, can be made for a variety of reasons, and may not necessarily mean that the seller thinks the stock will go down.

Breaking Down the Significance of 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.

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