CarMax Inc (KMX) fair value

ACCE thesis

CarMax sells used vehicles through its own retail stores and online platform, alongside CarMax Auto Finance, its in-house lender, and it buys vehicles directly from consumers, a model that gives it a large and largely self-sourced used inventory. Its moat is that scale in sourcing and reconditioning, which most regional independents cannot match, and the captive finance arm adds a second earnings stream tied to each car it sells. Revenue growth of 17.7% is the headline figure, but the margins are thin, with a 2.8% operating margin and 11.7% gross margin, and an ROE of only 4.7%, so the case rests on whether volume and finance income can lift profitability. At a 24.0 trailing and 21.6 forward P/E, the market is pricing in a recovery in earnings rather than paying for current profitability. Without index membership and at a 62/100 score, this is a name that needs a deeper look at margin trajectory and used-car pricing before it earns a place in a concentrated book.