Copart (CPRT) Part 3. What Is the Empire Worth Now? I Valued What Management Refuses to Value.
For thirty years, analysts have asked Copart what its land is worth. The answer never changes. We don’t know. We don’t calculate it. So I calculated it, country by country.
In 1997, a shareholder asked Warren Buffett how he thinks about risk.
His answer separated two things. There is business risk, the chance that the company itself fails. And there is price risk, the damage you inflict on yourself by paying too much for a company that never fails at all. Overpaying for a wonderful business, he said, is usually “a risk of time rather than loss of principal.”
You do not lose your money. You lose your years.
No stock of the last three decades proves the point like Copart. The business compounded at over 21% a year, grew revenue in 27 of 30 years, and never once gave anyone a cheap entry. It punished two kinds of investors the entire time. The ones who paid any price served Buffett’s sentence and lost years waiting for the earnings to catch up. The ones who waited for a discount never got in at all.
A fantastic company. And for long stretches, at 35 and 40 times earnings, a bad investment. Those are two different things, and confusing them is the most expensive mistake in quality investing.
This is the post where I find out which one Copart is at $29.
There is a ritual on Copart earnings calls. An analyst asks what return the company earns on its land. Half a billion dollars a year of shareholder money, going into dirt. Management gives the same answer every time.
“We don’t know. We don’t calculate it.”
They will count every car in every yard on every continent for you. On this one number, the most transparent company in the industry goes silent. Book value of the land, $2.39 billion. Real value, unknown.
So I calculated it. What I found changes the entire question, because at a certain land value, the price risk Buffett described does not shrink. It inverts. Then I reverse engineered the growth rate the market charges you at $29.
In Part 1, a farmer won an auction because he counted two thousand cars while the men in suits bid by hunch.
In Part 2, I graded the men who run the company.
This week, I counted the acres.
