ONE LEVEL DEEPER
CPRT
Warren Buffett frameworkThe Owner-OperatorBenjamin Graham frameworkThe Value ArchitectMichael Mauboussin frameworkThe Expectations EngineerHoward Marks frameworkThe Cycle WhispererPeter Lynch frameworkThe Everyday Edge

Current ratio hit 10.06 while ROA fell to 3.3% — maximum safety achieved minimum returns below treasury yields.

cautiousNeutralconviction

CPRT exemplifies Graham's greatest fear — a fortress balance sheet deployed at returns below risk-free rates, destroying value while accumulating cash.

THE LENSES
BALANCE SHEET FORTRESSfortress

Does the balance sheet provide a margin of safety against adversity?

Current ratio of 10.06 in Q1'26, 98th percentile of 10-year range
$5.1 billion cash position with minimal debt, net debt-to-EBITDA of -11.27
Interest coverage and debt service not applicable with net cash position
Quick ratio and liquidity metrics at extreme highs, 2.29 standard deviations above mean

This framework sees an impregnable fortress built to withstand any conceivable storm. The balance sheet offers maximum downside protection — precisely what Graham sought after surviving 1929. Yet this very strength becomes weakness when cash earns 3.3% against 4.33% treasuries.

Current Ratio
EARNINGS YIELD VS BONDSdangerous

Does the earnings yield compensate for equity risk over bonds?

Earnings yield of 0.89% vs treasury yield of 4.33% in Q1'26
Negative spread of -3.44%, among worst in market
TTM revenue growth only 2.4%, insufficient to close yield gap
Market implies 4.71% perpetual growth, nearly double actual growth

Graham would find this arithmetic indefensible — paying 28x earnings for 2.4% growth when treasuries offer 4.33% risk-free. The framework sees no compensation for equity risk, only hope that growth accelerates beyond historical evidence.

Earnings Yield
THE MARGIN OF SAFETYvulnerable

Does the price protect against permanent loss of capital?

Trading 31.6% above DCF fair value of $25.37
P/E of 28x at 53rd percentile of 10-year range
47.7% drawdown from peak still underway after 216 days
EV/EBITDA of 77.13 at 40th percentile historically

The framework finds negative margin of safety — price exceeds intrinsic value by nearly one-third. Graham taught that overpaying transforms even excellent businesses into poor investments. At current valuations, the price offers vulnerability, not protection.

P/E Ratio
THE EARNINGS RECORDexceptional

Has the company demonstrated consistent earnings over many years?

Net margins consistently above 30%, reaching 31.3% in Q1'26
Positive earnings every quarter with 87.2% analyst beat rate
Operating income stable despite revenue volatility
Service revenue concentration at 85.4% provides recurring base

This framework recognizes exceptional earnings quality — precisely the consistency Graham demanded. The business generates reliable profits through cycles. Yet even excellent earnings become poor investments at excessive prices.

Net Income
MR. MARKETconflicted

Is the market creating opportunity through pessimism or risk through optimism?

Institutions increased ownership to 81.1% despite insider selling
Analyst targets clustered around $40.50 with moderate dispersion
Market positioned for perfection with asymmetric reactions to earnings
Stock corrected 47.7% but remains above fundamental value

Mr. Market shows schizophrenia — institutional euphoria meets insider pessimism. The framework sees danger when smart money disagrees this sharply. Graham taught that following the crowd at premium valuations rarely ends well.

Price Targets
33.0
low
48.0
high
40.5
median
40.5
consensus
KEY NUMBERS
VERDICT

Applying Graham's framework reveals a tragic irony: CPRT built the fortress balance sheet he advocated, only to destroy value through capital inefficiency. The business earns 3.3% on assets while treasuries yield 4.33% — arithmetic Graham would find unconscionable. Premium valuations atop deteriorating returns create precisely the combination Graham warned against. Would Graham prefer owning this business at 10x earnings or treasuries at 4.33%?

This analysis applies Benjamin Graham's published investment framework to publicly available financial data. It is not authored by, endorsed by, or affiliated with Benjamin Graham. Educational purposes only. Not financial advice.

OTHER PERSPECTIVES
Warren Buffett framework
The Owner-Operator
Leaning Bearish
Peter Lynch framework
The Everyday Edge
Leaning Bearish
Howard Marks framework
The Cycle Whisperer
Leaning Bearish
Michael Mauboussin framework
The Expectations Engineer
Leaning Bearish
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