Global

Critical Comparison: Copart, Inc. (CPRT) vs. Danaher Corporation (DHR)

Copart, Inc. (NASDAQ:CPRT) shares are up more than 15.67% this year and recently decreased -2.91% or -$1.5 to settle at $49.96. Danaher Corporation (NYSE:DHR), on the other hand, is up 11.87% year to date as of 10/10/2018. It currently trades at $103.84 and has returned -4.32% during the past week.

Copart, Inc. (NASDAQ:CPRT) and Danaher Corporation (NYSE:DHR) are the two most active stocks in the Auto Dealerships industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

Growth

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect CPRT to grow earnings at a 22.30% annual rate over the next 5 years. Comparatively, DHR is expected to grow at a 9.01% annual rate. All else equal, CPRT’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 24.4% for Danaher Corporation (DHR). CPRT’s ROI is 22.60% while DHR has a ROI of 6.90%. The interpretation is that CPRT’s business generates a higher return on investment than DHR’s.

Cash Flow



The value of a stock is simply the present value of its future free cash flows. CPRT’s free cash flow (“FCF”) per share for the trailing twelve months was +0.20. Comparatively, DHR’s free cash flow per share was +1.09. On a percent-of-sales basis, CPRT’s free cash flow was 2.59% while DHR converted 4.16% of its revenues into cash flow. This means that, for a given level of sales, DHR is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios are important because they reveal the financial health of a company. CPRT has a current ratio of 2.60 compared to 1.50 for DHR. This means that CPRT can more easily cover its most immediate liabilities over the next twelve months. CPRT’s debt-to-equity ratio is 0.25 versus a D/E of 0.42 for DHR. DHR is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

CPRT trades at a forward P/E of 21.02, a P/B of 7.36, and a P/S of 6.45, compared to a forward P/E of 21.40, a P/B of 2.67, and a P/S of 3.77 for DHR. CPRT is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. CPRT is currently priced at a -14.42% to its one-year price target of 58.38. Comparatively, DHR is -9.49% relative to its price target of 114.73. This suggests that CPRT is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. CPRT has a beta of 1.01 and DHR’s beta is 1.03. CPRT’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. CPRT has a short ratio of 1.96 compared to a short interest of 2.22 for DHR. This implies that the market is currently less bearish on the outlook for CPRT.

Summary

Copart, Inc. (NASDAQ:CPRT) beats Danaher Corporation (NYSE:DHR) on a total of 9 of the 14 factors compared between the two stocks. CPRT is growing fastly, is more profitable, generates a higher return on investment, higher liquidity and has lower financial risk. CPRT is more undervalued relative to its price target. Finally, CPRT has better sentiment signals based on short interest.

Previous ArticleNext Article

Related Post

International Game Technology PLC (IGT) vs. Hostes... International Game Technology PLC (NYSE:IGT) shares are down more than -18.41% this year and recently increased 1.03% or $0.22 to settle at $21.63. Ho...
Dissecting the Numbers for The AES Corporation (AE... The AES Corporation (NYSE:AES) shares are up more than 22.62% this year and recently decreased -0.97% or -$0.13 to settle at $13.28. Parsley Energy, I...
Citigroup Inc. (C) vs. Johnson & Johnson (JNJ... Citigroup Inc. (NYSE:C) shares are down more than -3.39% this year and recently decreased -0.55% or -$0.4 to settle at $71.89. Johnson & Johnson (...
Century Aluminum Company (CENX) vs. Nutrien Ltd. (... Century Aluminum Company (NASDAQ:CENX) shares are down more than -38.54% this year and recently increased 0.84% or $0.1 to settle at $12.07. Nutrien L...
Critical Comparison: Box, Inc. (BOX) vs. Iconix Br... Box, Inc. (NYSE:BOX) shares are up more than 29.36% this year and recently increased 3.64% or $0.96 to settle at $27.32. Iconix Brand Group, Inc. (NAS...