NEW YORK (TheStreet) -- Shares of CarMax Inc  (KMX) were rising, up 0.63% to $71.56 in late morning trading Thursday, after analysts at Sterne Agee CRT started coverage on the used car retailer with a "buy" rating earlier today.

The firm issued a price target of $87, citing the used-car company's dominance in the sector and its long-term opportunities.

Sterne Agee expects CarMax to triple its share in existing markets, and double its footprint as the supply of used cars increase.

Richmond, Va.-based CarMax is a holding company and its operations are conducted through its subsidiaries.

The company operates roughly 131 used car superstores in 64 metropolitan markets. 

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 several positive factors, 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, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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

  • KMX's revenue growth has slightly outpaced the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 14.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CARMAX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CARMAX INC increased its bottom line by earning $2.73 versus $2.17 in the prior year. This year, the market expects an improvement in earnings ($3.02 versus $2.73).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 44.3% when compared to the same quarter one year prior, rising from $99.21 million to $143.14 million.
  • 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.
  • Powered by its strong earnings growth of 52.27% and other important driving factors, this stock has surged by 60.59% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: KMX Ratings Report

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