Why Carmax (KMX) Stock Is Rising Today

NEW YORK (TheStreet) -- Carmax (KMX) shares are up 2.3% to $51.17 after KeyBanc initiated coverage on the stock with a "buy" rating and $62 price target on Thursday.

Analysts expect the company to outperform the industry based on its access to a growing supply of late-model used vehicles, aggressive location openings and the maturation of recently opened locations.

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Separately, TheStreet Ratings team rates CARMAX INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CARMAX INC (KMX) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 8.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 57.01% to -$120.02 million when compared to the same quarter last year. In addition, CARMAX INC has also vastly surpassed the industry average cash flow growth rate of -3.54%.
  • CARMAX INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CARMAX INC increased its bottom line by earning $2.17 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.44 versus $2.17).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, CARMAX INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: KMX Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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