CarMax Inc. KMX is well poised for growth, backed by aggressive store-expansion activities and strong omni-channel experience. However, it’s rising selling, general and administrative expenses are concerning.
CarMax has an impressive run so far this year. The company’s shares have gained 35.7% year to date, outperforming 17.5% rally of the industry it belongs to.
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Aiding the Stock?
Significant progress made on the rollout of omni-channel experience allows customers to move smoothly between physical locations and online channels. The company’s focus to further boost its execution and performance, and enhance customer experience by leveraging data serves as a competitive advantage.
Moreover, CarMax is making efforts to improve the digital platform and opening stores in new markets. Further, it launched new customer experiences such as finance pre-approval, home delivery, online appraisal and express pick up. The company is also emphasizing on the used-car market, which bodes well.
What’s Deterring the Stock?
Investments made in initiatives to enhance innovation carry huge costs, which can dent profit margins. Moreover, the company is witnessing rise in selling, general and administrative (SG&A) expenses due to store openings. Share-based compensation expenses further lead to an increase in expenses of CarMax.
Zacks Rank & Stocks to Consider
A few better-ranked stocks in the Auto-Tires-Trucks sector are BRP Inc DOOO, currently sporting a Zacks Rank #1 (Strong Buy), and Lithia Motors LAD and CNH Industrial N.V. CNHI, carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BRP has an expected earnings growth rate of 17.2% for 2019. The company’s shares have gained 45.8% year to date.
Lithia Motors has an expected earnings growth rate of 12.9% for 2019. The company’s shares have gained 58.6% year to date.
CNH Industrial has an estimated earnings growth rate of 6.2% for 2019. Its shares have gained 5.6% year to date.
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