NYSE:KMX
CARMAX INC
CarMax operates as America's largest used-car retailer, providing a transparent no-haggle buying process across the United States.
Key Metrics
Investment Thesis
Bull Case
CarMax offers an attractive investment case due to its dominant market share and consistent ability to generate free cash flow, which has supported aggressive buyback programs. The used-car sector remains essential regardless of economic cycles, providing CarMax with defensive characteristics while offering upside if consumer demand for vehicles rebounds.
Bear Case
The company faces headwinds from a slowing revenue trend in recent years and high leverage relative to its equity base, as indicated by total liabilities exceeding $21B. Additionally, the heavy capital expenditure requirement of nearly $468M annually and sensitivity to interest rate hikes on their large financing portfolio could compress future margins.
About CARMAX INC
CarMax Inc. is a leading used-car retailer operating primarily across the United States, offering a wide selection of pre-owned vehicles with a unique no-haggle shopping experience. The company serves millions of customers annually through its extensive network of retail locations, generating substantial revenue from vehicle sales and related financial services.
Analysis
Management Discussion
Despite a slight revenue contraction in 2025 compared to the previous two years, CarMax successfully maintained stable net income growth, demonstrating operational resilience. The company generated strong operating cash flow of $624.4M and returned significant capital to shareholders through nearly half a billion dollars in common share repurchases.
Industry Overview
The used-car retail industry is highly fragmented but consolidated around major players like CarMax who benefit from economies of scale in sourcing and selling vehicles. Competition is intensifying as traditional dealerships adopt more customer-friendly models, pressuring prices and requiring continuous investment in technology and inventory management.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue | $29.68B | $26.54B | $26.35B |
| Cost of Revenue | $26.88B | $23.82B | $23.46B |
| Gross Profit | $2.80B | $2.71B | $2.90B |
| Operating Expenses | $2.16B | $2.07B | $2.23B |
| Operating Income | $636.8M | $641.6M | $669.4M |
| G&A | $2.49B | $2.29B | $2.44B |
| Stock-Based Comp | $85.6M | $119.7M | $134.7M |
| D&A | $265.2M | $260.4M | $294.8M |
| Depreciation | $244.4M | $261.4M | $287.8M |
| Amortization | $15.4M | $15.4M | $15.4M |
| Other OpEx | $-324.0M | $-214.8M | $-206.9M |
| Non-Operating Income | $0 | $0 | $0 |
| Interest Expense | $120.4M | $124.8M | $107.9M |
| Pre-Tax Income | $636.8M | $641.6M | $669.4M |
| Income Tax | $152.0M | $162.4M | $168.8M |
| Continuing Ops | $484.8M | $479.2M | $500.6M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $484.8M | $479.2M | $500.6M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $484.8M | $479.2M | $500.6M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Current Assets | $5.04B | $5.23B | $5.08B |
| Cash & Equivalents | $314.8M | $574.1M | $247.0M |
| Accounts Receivable | $298.8M | $221.2M | $188.7M |
| Inventory | $3.73B | $3.68B | $3.93B |
| Other Current Assets | $701.7M | $753.2M | $707.3M |
| Long-Term Assets | $21.14B | $21.97B | $22.33B |
| PP&E (Net) | $3.43B | $3.67B | $3.84B |
| Intangibles | $191.1M | $175.7M | $160.3M |
| Goodwill | $141.3M | $141.3M | $141.3M |
| Operating Leases | $545.7M | $520.7M | $493.4M |
| Other LT Assets | $16.83B | $17.47B | $17.69B |
| Total Assets | $26.18B | $27.20B | $27.40B |
| Current Liabilities | $1.94B | $2.31B | $2.20B |
| Accounts Payable | $826.6M | $933.7M | $977.8M |
| Current Debt | $111.9M | $313.3M | $16.8M |
| Current Leases | $53.3M | $57.2M | $59.3M |
| Taxes Payable | — | — | $87.5M |
| Other Current Liab | $467.6M | $484.2M | $526.5M |
| Long-Term Liabilities | $18.63B | $18.81B | $18.96B |
| LT Operating Leases | $523.8M | $496.2M | $482.0M |
| Other LT Liab | $18.11B | $18.31B | $18.48B |
| Total Liabilities | $20.57B | $21.12B | $21.16B |
| Shareholders' Equity | $5.61B | $6.07B | $6.24B |
| Paid-In Capital | $1.71B | $1.81B | $1.89B |
| Retained Earnings | $3.72B | $4.13B | $4.27B |
| AOCI | $97.9M | $59.3M | $3.1M |
| Total L&E | $26.18B | $27.20B | $27.40B |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Net Income (CFO) | $484.8M | $479.2M | $500.6M |
| Non-Cash Adjustments | $1.45B | $-882.2M | $-540.7M |
| Working Capital Changes | $-650.5M | $861.7M | $664.6M |
| Cash from Operations | $1.28B | $458.6M | $624.4M |
| Capital Expenditures | $422.7M | $465.3M | $467.9M |
| Cash from Investing | $-425.8M | $-467.0M | $-461.0M |
| Share Buybacks | $333.9M | $94.1M | $428.5M |
| Cash from Financing | $-710.2M | $307.8M | $-453.5M |
| FX Effect | $0 | $0 | $0 |
| Net Change in Cash | $147.4M | $299.4M | $-290.1M |
| Beginning Cash | $803.6M | $951.0M | $1.25B |
| Ending Cash | $951.0M | $1.25B | $960.3M |
Frequently Asked Questions
How does CARMAX INC make money?
The company's revenue is driven by three primary streams: direct sales of used vehicles, wholesale of returned inventory to other dealerships, and financial services income including auto loans, leases, and credit card fees generated from its customers.
What are the main risks for KMX?
Investors should consider exposure to cyclical economic downturns that reduce discretionary consumer spending on vehicles, sensitivity to rising interest rates which can impact financing costs and demand, as well as inventory valuation risks if used car prices decline rapidly.
What is KMX's competitive advantage?
CarMax possesses a dominant market position with the largest footprint in the U.S. used-car sector, a proprietary no-haggle pricing model that enhances customer experience, and robust operational leverage allowing for significant profitability even when margins tighten.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.