June 5, 2003 CarMax (KMX)
Well it is off to the races again. Market selling off this morning and the buyers won't stay home. They are working to fight back to an up day. Can you just feel it? Anyway, speaking of races, how about a car stock?

CarMax (KMX NYSE) is, according to Cnn.money "a specialty retailer of used cars and light trucks. The Company operates 41 used car superstores in 18 markets. It also operates 17 new-car franchises."

Currently, CarMax is trading at $28.65 up $3.93 or 15.90% on the day. What triggered the bounce was an announcement regarding first quarter sales and earnings that came out earlier this morning. The lesson here is about EXPECTATIONS. So many moves in the market are about 'restoring valuation'. How does that sound sports fans? That is when something comes out that is different than current expectations, a thousand 'wonks' with sliderules get out in the back room and figure out what the PROPER valuation should be and we see a BOUNCE or a DROP that stands out.

KMX reported today that sales for the first quarter ending May 31, 2003, were at record levels.

Total sales rose 17% to $1.17 billion from $1.01 billion and more importantly, as a retail venture, COMPARABLE store sales...really a SAME STORE SALES figure rose 10% compared to last years first quarter.

To top it off the RAISED first quarter net earnings EXPECTATIONS to approximately 34 cents/share.

Looking at Morningstar.com for 5 year financials we see this relatively young company having sales of $0.9 billion in 1998 going to $1.5 billion in 1999, $2.0 billion in 2000, $2.5 billion in 2001, $3.2 billion in 2002 and $3.5 billion in the trailing twelve months.

This company also generates a lot of CASH. In 2000, free cash flow was a NEGATIVE $69 million, turning positive in 2001 with $7 million, dropping to only $1 million in 2002 but back to $33 million positive in 2002. The trend here is very nice.

The company is flush with cash with $74.7 million in cash and $576.3 million in other current assets. Current liabilities is a manageable $159.6 million and Long-Term liabilities is a moderate $112.1 million.

I like this stock a lot. I hate car stocks right now in general. But with the price of a new car...and I drive a 10 year old Jeep!....many people are turning to used cars....and this company has some new car dealerships as well....I don't own any shares and would LOVE to own some but am on my margin max so I leave it to all of you sports fans to buy some of this if you like.

Have a great Thursday! Bob