Copart Inc.

1
Copart Inc.

• David Mizell
• 11/30/2004

2
Recommendation

• Recommendation Hold
• We currently own 1,000 shares
• Bought at 7.82 per share on February 28, 2003
• Current price of 22.44 per share
• Cost Basis is 7,820.
• The market value is 22,440.
• 187 increase

3
Company Overview

• Founded in 1982, became public in 1994
• Provides vehicle suppliers, primarily insurance
  companies, with a full range of services to
  process and sell salvage vehicles through
  auctions, principally to licensed dismantlers,
  rebuilders and used vehicle dealers.
• Generates revenue from auction fees paid by
  vehicle suppliers and buyers as well as fees for
  services such as towing and storage.
• Operates 105 facilities in the US and Canada

4
Financial Performance

• Total revenues were
• - 316,455,800 in 2002
• - 347,423,100 in 2003
• - 400,796,300 in 2004
•  Basic net earnings per share
• - 0.63 in 2002
• - 0.62 in 2003
• - 0.87 in 2004
• Market Cap is 2.02 Billion
• P/E ratio is 25.94

5
Coparts Numbers

• Market Cap is 2.02B
• P/E (ttm) is 25.94
• EPS (ttm) is .865
• Revenue (ttm) is 400.80M
• Operating Margin (ttm) is 31.13
• Profit Margin (ttm) is 19.76
• Beta is 1.357

6
Stock Price Over Last 5 Years
7
Financial Analysis

• P/E Approach
• Returns a price of 22.25
• DCF
• Returns a price of 15.38
• View Excel Spreadsheet

8
Copart vs. NASDAQ
9
Competitor Comparison

• Copart Inc.
• Market Cap2.02B
• Rev. Growth (ttm)15.40
• Revenue (ttm)400.80M
• Net Income (ttm)79.22M
• EPS (ttm)0.865
• P/E (ttm)25.94
• Insurance Auto Auction Inc.
• Market Cap256.25M
• Rev. Growth (ttm)-10.50
• Revenue (ttm)235.14M
• Net Income (ttm)10.61M
• EPS (ttm)0.901
• P/E (ttm)24.63

10
CPRT vs. IAAI
11
Porters Five Forces

• Threat of New Entrants Low
• Threat of Substitutes Low
• Bargaining Power of Buyers High
• In auction format, people pay only what they want
  and have many choices from which to pick. The
  buyers in essence set the price.
• Industry Rivalry Low
• Bargaining Power of Suppliers Low

12
Macroeconomic Review

• Motor Vehicle Crash Statistics
• 6,328,000 auto accidents in 2003, up 12,000 from
  2002
• Cost of auto accidents 231B in 2000
• 26 of total cost is property damage (60B)
• 50 of those costs paid by insurance companies
• Proliferation of Online Auction Systems
• EBay, Autotrader, Priceline, etc.

13
Company and Business Basics

• Coparts Growth Strategy
• Acquiring new auto auction salvage facilities in
  key locations
• Bought 3 sites, opened 2 more in 2004
• Pursuing national and regional vehicle supply
  agreements with insurance companies
• Maximizing returns to suppliers and maximize
  product value to buyers
• For suppliers, real-time access to sales data
  online
• For buyers, implementing VB2 bidding at all
  facilities

14
Company and Business Basics

• Coparts Growth Strategy (continued)
• Increasing revenue and profitability at public
  auction facilities
• Own 6 facilities just for public auto auctions
• Set up some online car auctions
• Exploring new VB2 applications outside the auto
  auction industry

15
Company and Business Basics

• Value-Added Services
• Internet bidding, Internet proxy bidding and
  virtual sales powered by VB2
• E-mail notifications to potential buyers of
  salvage vehicles that match desired
  characteristics
• Ten-view digital imaging of each vehicle and the
  scanning of each vehicles title and other
  significant documents such as body shop invoices,
  all of which are available online

16
Company and Business Basics

• Value-Added Services (continued)
• CoPartfinder- Internet-based used vehicle parts
  locator that provides vehicle dismantlers with
  resale opportunities for the salvage vehicles
  they purchase
• Offsite sales that allow vehicle suppliers to
  sell any vehicle, boat, or heavy equipment from
  where it sits

17
Company and Business Basics

• VB2 (Virtual Bidding-2nd generation)
• What is VB2?
• VB2 is Coparts online auto auction system
• As of this year, all of Coparts auctions have
  been converted from live on-site to online
• Why is VB2 so important?
• Increases returns to sellers by expanding the
  pool of bidders to any person in the world with
  access to the Internet
• Increases buyer convenience by eliminating the
  need to travel to the physical location of the
  auction

18
Company Updates

• Copart is expanding rapidly
• They have added 24 auction yards since 2002.
• Provide the most extensive vehicle services in
  the industry
• VB2 online technology is now fully implemented,
  and it has greatly improved their business
• Concerns
• This was a very low-tech company that has
  suddenly gone high tech very quickly.
• Buyer and Website Issues

19
Summary

• Recommendation Hold 1,000 shares
• I believe Copart will continue to lead their
  industry. They have a great niche, and I believe
  they will continue to take advantage of it. Also,
  they provide the best services in the industry,
  and their online auction system will yield great
  benefits for them moving forward.
• Questions?