KMX OSV

CarMax Inc.(kmx)

February 16, 2015 Figures in Millions except per share values

Company Overview

ValuationCurrent Price 67.68$ Margin of SafetyNCAV (31.07)$

Total Net Reprod. Cost 58.42$

Earnings Power Value (EPV) (36.59)$

Discounted Cash Flow (DCF) (69.44)$

EBIT Multiple Valuation 61.94$

Katsenelson Absolute PE 61.99$

Ben Graham Formula 58.08$

Key Statistics Company StatsMkt Cap ($M) 14,213.48$

Enterprise Value ($M) TTM 22,849.32$ Earnings Date 19-Dec-14

52 Wk High 68.71$ Shares Outstanding 210

52 Wk Low 42.54$ Shares Float 209

% off 52Wk Low 59.1% Insider Ownership 0.40%

Insider Transactions -44.5% Fundamental Ratios 2013 2014 TTM

Cash Flows Institutional Ownership 0.0% P/E 22.10 22.45 28.66

Free Cash Flow Float Short 6.9% P/E (cash adjusted) 21.07 21.18 27.98

5 yr FCF Growth 0.0% Short Ratio 8.5 EV/EBITDA 29.06 30.26 35.34

10 yr FCF Growth 0.0% Piotroski (TTM) 4 EV/EBIT 35.45 36.51 42.47

Altman (MRQ) 1.7 P/S 0.88 0.88 1.12

Effectiveness Beneish (TTM) -2.6 P/BV 3.18 3.33 4.46

CROIC P/Tang BV 3.18 3.33 4.46

Avg -2.2% Margins & Profitability P/CF 20.28 19.77 25.36

FCF/S Gross P/FCF (9.47) (11.98) (13.65)

Avg -1.6% Gross Margin 13.0% FCF/S -9.3% -7.3% -8.2%

ROA Operating FCF Yield -10.6% -8.3% -7.3%

Avg 5.0% Operating Margin 4.1% Magic Earnings Yield 2.8% 2.7% 2.4%

ROE Net Profit ROE 14.4% 14.9% 15.8%

Avg 15.0% Net Margin 4.0% ROA 4.4% 4.2% 4.3%

ROIC 2.9% 2.8% 2.9%

Efficiency Financial Strength (MRQ) CROIC -11.0% -8.5% -9.4%

Receivables Turnover (TTM) 141.6 Current Ratio(MRQ) 2.8 Current Ratio 3.38 3.02 2.77

Inventory Turnover (TTM) 6.8 Quick Ratio(MRQ) 0.7 Total Debt/Equity Ratio 1.88 2.12 2.28

Days Sales Outstanding (TTM) 3.0 LTD/Eq(MRQ) 2.7 Inventory Turnover 7.28 6.92 6.81

Tot D/Eq(MRQ) 2.8

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles in the

United States. It operates in two segments, CarMax Sales Operations and CarMax

Auto Finance. It sells vehicles that do not meet its retail standards to licensed dealers

through on-site wholesale auctions, as well as sells new vehicles under franchise

agreements. The company also provides customers financing alternatives through its

finance operation, CarMax Auto Finance, as well as through its third-party financing

providers. In addition, it offers a range of other related products and services, including

the appraisal and purchase of vehicles directly from consumers; sale of extended

service plans and guaranteed asset protection services; and vehicle repair services.

The company provides vehicle financing services through its CarMax superstores. As of

February 28, 2014, it operated 1 new car store, and 131 used car superstores in 64

markets. The company was founded in 1993 and is based in Richmond, Virginia.

Selected Financial Statements

Industry: Auto Dealerships

0

1

2

3

4

5Low Risk

High Growth

Under Valued

Well Managed

Good

Financials

Strong Moat

-100.0%

-15.9%

-100.0%

-100.0%

-9.3%

-9.2%

-16.5%

-$80.00

-$60.00

-$40.00

-$20.00

$0.00

$20.00

$40.00

$60.00

$80.00

Feb-04 Feb-06 Feb-08 Feb-10 Feb-12 Feb-14

Price vs DCF Intrinsic Value

Stock Price Intrinsic Value Buy Price

(In Millions, Except per Share Amounts) 2010 2011 2012 2013 2014 TTM/Latest

Revenue 7,470$ 8,976$ 10,004$ 10,963$ 12,574$ 13,367$

Gross Profit 1,099$ 1,301$ 1,379$ 1,464$ 1,649$ 1,731$

Margin % 14.71% 14.50% 13.78% 13.36% 13.11% 12.95%

R&D -$ -$ -$ -$ -$ -$

Margin % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Operating Income 280$ 422$ 438$ 433$ 493$ 538$

Margin % 3.75% 4.71% 4.38% 3.95% 3.92% 4.03%

Net Income 282$ 377$ 414$ 434$ 493$ 530$

Margin % 3.77% 4.21% 4.14% 3.96% 3.92% 3.96%

Earnings Per Share

Basic 1.28$ 1.69$ 1.83$ 1.90$ 2.20$ 2.40$

Diluted 1.27$ 1.66$ 1.79$ 1.87$ 2.16$ 2.36$

Weighted Average Diluted Shares

Outstanding 222.23 227.60 230.72 231.82 227.58 221.07

Dividends Per Share -$ -$ -$ -$ -$ -$

Dividend Yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Net Cash From Operating Activities 50$ (7)$ (62)$ (778)$ (613)$ (786)$

(Dollars in Millions)

Net Property, Plants & Equipment 893$ 920$ 1,279$ 1,429$ 1,653$ 1,754$

Total Assets 2,556$ 6,840$ 8,332$ 9,889$ 11,707$ 12,400$

Long-term Debt 145$ 4,040$ 5,012$ 6,185$ 7,515$ 8,135$

Stockholders' Equity 1,934$ 2,292$ 2,673$ 3,019$ 3,317$ 3,358$

CarMax Inc.

(kmx) 8.109780673 8.052810624 7.277381096 Figures in Millions except per share values

February 16, 2015 Annual 1000000

Annual Statements 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2015E

Income Statement 9 8 7 6 5 4 3 2 1 0

Revenue 5,260.3$ 6,260.0$ 7,465.7$ 8,199.6$ 6,974.0$ 7,470.2$ 8,975.6$ 10,003.6$ 10,962.8$ 12,574.3$ 13,367.1$

1 % change from prev period 19.0% 19.3% 9.8% -14.9% 7.1% 20.2% 11.5% 9.6% 14.7% 6.3%

Cost of Revenues 4,610.1$ 5,469.3$ 6,494.6$ 7,127.1$ 6,005.8$ 6,371.3$ 7,674.3$ 8,624.8$ 9,498.5$ 10,925.6$ 11,636.1$


COGS (%) 87.6% 87.4% 87.0% 86.9% 86.1% 85.3% 85.5% 86.2% 86.6% 86.9% 87.1%

Gross Profit 650.2$ 790.7$ 971.1$ 1,072.4$ 968.2$ 1,098.9$ 1,301.2$ 1,378.8$ 1,464.4$ 1,648.7$ 1,730.9$


Gross Income (%) 12.4% 12.6% 13.0% 13.1% 13.9% 14.7% 14.5% 13.8% 13.4% 13.1% 12.9%

Operating ExpensesSelling, General & Admin. Expenses 546.6$ 652.0$ 776.2$ 858.4$ 882.4$ 818.7$ 878.8$ 940.8$ 1,031.0$ 1,155.2$ 1,192.9$

1 % change from prev period 19.3% 19.0% 10.6% 2.8% -7.2% 7.3% 7.1% 9.6% 12.0% 3.3%

SG&A (%) 10.4% 10.4% 10.4% 10.5% 12.7% 11.0% 9.8% 9.4% 9.4% 9.2% 8.9%

Research & Development -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

1 % change from prev period - - - - - - - - - -

R&D (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

EBITDA 123.8$ 165.4$ 229.4$ 260.7$ 140.6$ 338.5$ 498.7$ 520.8$ 528.6$ 595.4$ 646.5$


EBITDA (%) 2.4% 2.6% 3.1% 3.2% 2.0% 4.5% 5.6% 5.2% 4.8% 4.7% 4.8%

Other Special Charges 0.6$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Depreciation & Amortization 20.1$ 26.7$ 34.6$ 46.6$ 54.7$ 58.3$ 76.3$ 82.8$ 95.3$ 101.9$ 108.5$

1 % change from prev period 32.5% 29.4% 34.9% 17.4% 6.6% 30.8% 8.5% 15.1% 7.0% 6.5%

Depreciation & Amortization (%) 0.4% 0.4% 0.5% 0.6% 0.8% 0.8% 0.9% 0.8% 0.9% 0.8% 0.8%

Operating Income 103.6$ 138.7$ 194.9$ 214.1$ 85.8$ 280.2$ 422.4$ 438.0$ 433.3$ 493.5$ 538.0$

1 % change from prev period 33.9% 40.5% 9.8% -59.9% 226.5% 50.8% 3.7% -1.1% 13.9% 9.0%

Operating Income (%) 2.0% 2.2% 2.6% 2.6% 1.2% 3.8% 4.7% 4.4% 4.0% 3.9% 4.0%

Other Income and ExpenseEBIT 103.6$ 138.7$ 194.9$ 214.1$ 85.8$ 280.2$ 422.4$ 438.0$ 433.3$ 493.5$ 538.0$

1 % change from prev period 33.9% 40.5% 9.8% -59.9% 226.5% 50.8% 3.7% -1.1% 13.9% 9.0%

EBIT (%) 2.0% 2.2% 2.6% 2.6% 1.2% 3.8% 4.7% 4.4% 4.0% 3.9% 4.0%

Interest Expense 2.8$ 4.1$ 5.4$ 5.0$ 6.1$ 3.5$ 34.7$ 33.7$ 32.4$ 30.8$ 30.1$

1 % change from prev period 45.9% 31.3% -7.8% 22.8% -43.1% 902.3% -2.8% -4.0% -4.7% -2.2%

Interest Income 0.4$ 1.0$ 1.2$ 1.4$ 1.8$ 0.6$ -$ -$ -$ 336.2$ 164.7$

1 % change from prev period 143.0% 17.6% 13.5% 30.7% -68.6% -100.0% - - - -51.0%

Other Income 82.7$ 104.3$ 132.6$ 85.9$ 15.3$ 175.2$ 220.5$ 262.6$ 300.4$ (1.5)$ 186.0$

1 % change from prev period 26.2% 27.1% -35.3% -82.2% 1046.3% 25.8% 19.1% 14.4% -100.5% 12522.4%

Total Other Income 83.1$ 106.8$ 134.0$ 87.4$ 17.4$ 175.1$ 219.5$ 262.6$ 300.4$ 334.7$ 349.6$

1 % change from prev period 28.5% 25.5% -34.8% -80.1% 907.5% 25.3% 19.7% 14.4% 11.4% 4.5%

Income Before Taxes (EBT) 184.5$ 240.0$ 323.3$ 297.1$ 96.8$ 452.5$ 608.2$ 666.9$ 701.4$ 797.3$ 858.6$


Income Taxes/(Credit) 71.6$ 91.9$ 124.8$ 115.0$ 37.6$ 170.8$ 230.7$ 253.1$ 267.1$ 304.7$ 328.7$


Tax Rate % 38.8% 38.3% 38.6% 38.7% 38.8% 37.8% 37.9% 38.0% 38.1% 38.2% 38.3%

Earnings After Taxes 112.9$ 148.1$ 198.6$ 182.0$ 59.2$ 281.7$ 377.5$ 413.8$ 434.3$ 492.6$ 529.8$

Minority Interest Expense -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Net Income From Continuing Operations 112.9$ 148.1$ 198.6$ 182.0$ 59.2$ 281.7$ 377.5$ 413.8$ 434.3$ 492.6$ 529.8$

Net Income From Discontinued Operations -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Extraordinary Income Losses -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Income From Cummulated Effect Of Accounting Changes -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Income From Tax Loss Carry Forward -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Other Gains/Losses -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Net Income Total 112.9$ 148.1$ 198.6$ 182.0$ 59.2$ 281.7$ 377.5$ 413.8$ 434.3$ 492.6$ 529.8$


Net Income (%) 2.1% 2.4% 2.7% 2.2% 0.8% 3.8% 4.2% 4.1% 4.0% 3.9% 4.0%

Shares and EPS 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

Total Basic EPS 0.54$ 0.71$ 0.93$ 0.84$ 0.27$ 1.28$ 1.69$ 1.83$ 1.90$ 2.20$ 2.40$


Fully Diluted EPS 0.53$ 0.70$ 0.92$ 0.83$ 0.27$ 1.27$ 1.66$ 1.79$ 1.87$ 2.16$ 2.36$


Dividends Paid Per Share -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Basic Shares Outstanding 208.1 209.3 212.5 216.0 217.5 219.5 223.4 226.3 228.1 223.6 210.0

1 % change from prev period 0.6% 1.5% 1.7% 0.7% 0.9% 1.8% 1.3% 0.8% -2.0% -6.1%

Diluted Shares Outstanding 211.6 212.7 216.7 220.5 219.4 222.2 227.6 230.7 231.8 227.6 221.1

1 % change from prev period 0.5% 1.9% 1.7% -0.5% 1.3% 2.4% 1.4% 0.5% -1.8% -2.9%

User Defined Shares Outstanding

Balance Sheet 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 MRQ

AssetsCash and Equiv 29.1$ 21.8$ 19.5$ 13.0$ 140.6$ 18.3$ 41.1$ 442.7$ 449.4$ 627.9$ 354.6$

1 % change from prev period -25.2% -10.6% -33.4% 984.4% -87.0% 125.0% 976.5% 1.5% 39.7% -43.5%

Short-Term Investments -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Net Receivables 246.3$ 239.1$ 279.9$ 349.0$ 433.9$ 682.4$ 119.6$ 86.4$ 92.0$ 79.9$ 108.9$

1 % change from prev period -2.9% 17.1% 24.7% 24.3% 57.3% -82.5% -27.7% 6.4% -13.1% 36.2%

Inventories, raw materials -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Inventories, work in progress -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Inventories, purchased components -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Inventories, finished goods -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Inventories, other 576.6$ 669.7$ 836.1$ 975.8$ 703.2$ 843.1$ 1,049.5$ 1,092.6$ 1,517.8$ 1,641.4$ 1,709.0$


Inventories 576.6$ 669.7$ 836.1$ 975.8$ 703.2$ 843.1$ 1,049.5$ 1,092.6$ 1,517.8$ 1,641.4$ 1,709.0$


Prepaid Expenses 13.0$ 11.2$ 15.1$ 19.2$ 10.1$ -$ -$ -$ -$ -$ -$

1 % change from prev period -13.8% 34.4% 27.5% -47.4% -100.0% - - - - -

Current Deferred Income Taxes -$ -$ -$ -$ -$ 5.6$ 5.2$ 9.9$ 5.2$ 7.9$ 8.3$

1 % change from prev period - - - - - -7.2% 91.4% -47.7% 51.5% 5.2%

Other Current Assets -$ -$ -$ -$ -$ 7.0$ 33.7$ 17.5$ 21.5$ 26.8$ 38.7$

1 % change from prev period - - - - - 379.7% -48.0% 22.8% 24.6% 44.3%

Total Current Assets 865.0$ 941.7$ 1,150.5$ 1,356.9$ 1,287.8$ 1,556.4$ 1,410.1$ 1,853.4$ 2,310.1$ 2,643.2$ 2,516.4$

1 % change from prev period 8.9% 22.2% 17.9% -5.1% 20.9% -9.4% 31.4% 24.6% 14.4% -4.8%

Land and Improvements 46.4$ 93.4$ 153.6$ 206.0$ 238.4$ 261.5$ 297.7$ 359.8$ 448.8$ 518.0$ -$

1 % change from prev period 101.3% 64.4% 34.1% 15.7% 9.7% 13.8% 20.9% 24.7% 15.4% -100.0%

Building and Improvements 94.4$ 194.3$ 318.9$ 462.1$ 593.5$ 605.9$ 623.0$ 1,128.1$ 1,226.3$ 1,375.7$ -$


Machinery, Furniture & Equipment 125.7$ 154.4$ 174.9$ 200.0$ 230.6$ 236.2$ 248.9$ 273.3$ 311.6$ 344.0$ -$


Construction in Progress 198.7$ 124.4$ 104.8$ 140.4$ 71.3$ 37.1$ 44.9$ 92.4$ 89.5$ 145.9$ -$

1 % change from prev period -37.4% -15.8% 34.0% -49.2% -47.9% 20.9% 105.8% -3.1% 63.0% -100.0%

Other Fixed Assets 29.3$ 37.1$ 37.1$ 29.3$ 30.6$ 30.6$ 32.4$ 1.7$ 1.7$ -$ 1,754.0$

1 % change from prev period 26.9% 0.0% -21.2% 4.7% 0.0% 5.7% -94.6% 0.0% -100.0% -

Total Fixed Assets 494.5$ 603.5$ 789.2$ 1,037.8$ 1,164.4$ 1,171.4$ 1,246.9$ 1,855.4$ 2,078.0$ 2,383.5$ 1,754.0$


Net Fixed Assets 406.3$ 499.3$ 651.9$ 862.5$ 938.3$ 893.5$ 920.0$ 1,278.7$ 1,429.0$ 1,653.0$ 1,754.0$


Intangible Assets -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Goodwill -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Non Current Deferred Income Taxes -$ 24.6$ 40.2$ 67.1$ 103.2$ 57.2$ 92.3$ 133.1$ 145.9$ 152.2$ 157.2$

1 % change from prev period - 63.5% 66.9% 53.8% -44.5% 61.2% 44.3% 9.6% 4.3% 3.3%

Other Long-Term Assets 21.8$ 44.0$ 43.0$ 46.7$ 50.0$ 49.1$ 4,417.5$ 5,066.2$ 6,003.6$ 7,258.8$ 7,972.3$

1 % change from prev period 102.2% -2.2% 8.5% 7.2% -1.8% 8898.4% 14.7% 18.5% 20.9% 9.8%

Total Long-Term Assets 428.1$ 567.9$ 735.1$ 976.2$ 1,091.4$ 999.8$ 5,429.8$ 6,478.1$ 7,578.5$ 9,063.9$ 9,883.5$


Total Assets 1,293.0$ 1,509.6$ 1,885.6$ 2,333.2$ 2,379.2$ 2,556.2$ 6,839.9$ 8,331.5$ 9,888.6$ 11,707.2$ 12,399.9$


Liabilities & Stockholders' EquityAccounts payable 170.6$ 188.6$ 254.9$ 306.0$ 237.3$ 253.3$ 269.8$ 324.8$ 336.7$ 427.5$ 418.3$

1 % change from prev period 10.5% 35.1% 20.1% -22.5% 6.7% 6.5% 20.4% 3.7% 27.0% -2.2%

Short-Term Debt + Notes Payable 65.5$ 60.2$ 151.7$ 100.7$ 159.0$ 123.2$ 134.3$ 189.4$ 199.4$ 243.0$ 282.9$

1 % change from prev period -8.1% 151.9% -33.6% 57.9% -22.5% 9.0% 41.0% 5.3% 21.8% 16.4%

Taxes Payable 26.3$ 23.6$ 13.1$ 17.7$ 12.1$ -$ -$ -$ -$ -$ -$

1 % change from prev period -10.5% -44.3% 34.9% -31.5% -100.0% - - - - -

Accrued Expenses 65.7$ 85.3$ 68.9$ 58.1$ -$ -$ -$ -$ -$ -$ -$

1 % change from prev period 29.9% -19.3% -15.7% -100.0% - - - - - -

Accrued Liabilities 1.2$ 5.6$ 23.4$ 7.6$ 55.8$ 94.6$ 103.4$ 129.0$ 147.8$ 202.6$ 205.5$

1 % change from prev period 374.8% 317.6% -67.6% 637.1% 69.5% 9.3% 24.7% 14.6% 37.0% 1.4%

Deferred Revenues -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Current Deferred Income Taxes 26.3$ 23.6$ 13.1$ 17.7$ 12.1$ -$ -$ -$ -$ -$ -$

1 % change from prev period -10.5% -44.3% 34.9% -31.5% -100.0% - - - - -

Other Current Liabilities -$ -$ -$ -$ 26.6$ 6.3$ 0.8$ 3.1$ 0.2$ 2.4$ 0.2$

1 % change from prev period - - - - -76.2% -87.8% 304.8% -92.9% 998.2% -90.0%

Total Current Liabilities 329.3$ 363.3$ 512.0$ 490.0$ 490.8$ 477.4$ 508.2$ 646.3$ 684.2$ 875.5$ 906.9$

1 % change from prev period 10.3% 40.9% -4.3% 0.2% -2.7% 6.5% 27.2% 5.9% 28.0% 3.6%

Long-Term Debt 128.4$ 134.8$ 33.7$ 227.2$ 178.1$ 27.4$ 3,909.5$ 4,509.8$ 5,672.2$ 7,024.5$ 7,648.3$

1 % change from prev period 5.0% -75.0% 573.2% -21.6% -84.6% 14183.3% 15.4% 25.8% 23.8% 8.9%

Other Liabilities 29.3$ 31.4$ 92.4$ 127.1$ 117.3$ 117.9$ 130.6$ 148.8$ 175.6$ 174.2$ 176.0$

1 % change from prev period 7.3% 194.3% 37.5% -7.7% 0.5% 10.8% 14.0% 18.0% -0.8% 1.0%

Deferred Income Taxes 5.0$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

1 % change from prev period -100.0% - - - - - - - - -

Total Long-Term Liabilities 162.7$ 166.2$ 126.2$ 354.2$ 295.4$ 145.3$ 4,040.1$ 5,012.1$ 6,185.3$ 7,514.7$ 8,135.0$


Total Liabilities 492.0$ 529.5$ 638.2$ 844.2$ 786.1$ 622.6$ 4,548.3$ 5,658.4$ 6,869.4$ 8,390.2$ 9,041.9$

1 % change from prev period 7.6% 20.5% 32.3% -6.9% -20.8% 630.5% 24.4% 21.4% 22.1% 7.8%

Retained Earnings 259.7$ 373.6$ 572.1$ 754.6$ 813.8$ 1,095.5$ 1,383.1$ 1,744.5$ 1,993.8$ 2,214.2$ 2,204.8$


Preferred Equity -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Total Equity 801.0$ 980.1$ 1,247.4$ 1,488.9$ 1,593.1$ 1,933.6$ 2,291.6$ 2,673.1$ 3,019.2$ 3,317.0$ 3,358.0$


Total Liabilities & Equity 1,293.0$ 1,509.6$ 1,885.6$ 2,333.2$ 2,379.2$ 2,556.2$ 6,839.9$ 8,331.5$ 9,888.6$ 11,707.2$ 12,399.9$


Cash Flows Statement 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

Cash Flows From Operating ActivitiesNet Income 101.3$ 134.2$ 198.6$ 182.0$ 59.2$ 281.7$ 377.5$ 413.8$ 434.3$ 492.6$ 529.8$

Depreciation & Amortization 20.1$ 26.7$ 34.6$ 46.6$ 54.7$ 58.3$ 76.3$ 82.8$ 95.3$ 101.9$ 108.5$

Deferred Income Taxes (7.3)$ (19.1)$ (14.2)$ (24.4)$ (41.5)$ 29.8$ 17.5$ (0.9)$ 3.9$ (17.2)$ (20.5)$

Operating Gains (1.5)$ (0.8)$ 0.1$ 1.4$ 10.7$ 0.4$ 1.1$ 2.6$ 2.0$ 2.7$ 2.6$

Extraordinary Gains -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

(Incr) Decr. in Receivables (9.2)$ 7.2$ (40.8)$ (69.1)$ (84.9)$ (248.5)$ (301.5)$ (642.5)$ (997.8)$ (1,312.1)$ (1,280.7)$

(Incr) Decr. in Inventories (110.5)$ (93.1)$ (166.4)$ (139.7)$ 272.6$ (140.0)$ (206.3)$ (43.1)$ (425.2)$ (123.6)$ (344.9)$

(Incr) Decr. in Prepaid Expenses (4.4)$ 1.8$ (3.9)$ (4.1)$ 9.1$ -$ -$ -$ -$ -$ -$

(Incr) Decr. in Other Current Assets -$ -$ -$ -$ -$ 3.1$ (27.4)$ 15.9$ (3.3)$ (3.0)$ (14.0)$

Decr. (Incr) in payables 30.4$ 35.1$ 85.6$ 14.6$ (40.3)$ 33.8$ (8.8)$ 43.1$ (0.6)$ 117.4$ 95.3$

Decr. (Incr) in Other Current Liabilities -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Decr. (Incr) in Other Working Capital 4.7$ 3.8$ 6.5$ 38.8$ (10.5)$ (8.2)$ (6.5)$ (18.6)$ (5.3)$ (87.3)$ (122.9)$

Other Non Cash Items 18.1$ 21.6$ 36.7$ 33.5$ 35.4$ 39.9$ 71.4$ 84.8$ 118.2$ 215.5$ 260.6$

Net Cash From Operating Activities 41.8$ 117.5$ 136.8$ 79.5$ 264.6$ 50.3$ (6.8)$ (62.2)$ (778.4)$ (613.2)$ (786.2)$

1 % change from prev period 180.8% 16.4% -41.9% 232.7% -81.0% -113.4% -819.9% -1152.2% 21.2% -28.2%

Cash Flows From Investing ActivitiesSale of Long-term Investments -$ -$ -$ -$ -$ -$ -$ -$ -$ 0.5$ 0.8$

1 % change from prev period - - - - - - - - - 65.7%

Sale of Short-term Investments -$ -$ 16.8$ 21.7$ -$ 2.2$ -$ 0.1$ 30.3$ -$ (0.0)$

1 % change from prev period - - 29.2% -100.0% - -100.0% - 58203.8% -100.0% -

Capital Expenditures (230.1)$ (194.4)$ (191.8)$ (253.1)$ (185.7)$ (22.4)$ (76.6)$ (172.6)$ (235.7)$ (310.3)$ (309.6)$

1 % change from prev period 15.5% 1.4% -32.0% 26.6% 87.9% -241.3% -125.4% -36.6% -31.7% 0.2%

Acquisitions -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Sale of Assets 89.0$ 78.3$ 4.6$ 1.1$ -$ 0.4$ -$ -$ -$ -$ 5.8$

1 % change from prev period -12.0% -94.2% -76.2% -100.0% - -100.0% - - - -

Purchase of Long-term Investments -$ -$ -$ -$ (4.0)$ -$ -$ -$ -$ (2.1)$ (5.2)$

1 % change from prev period - - - - 100.0% - - - - -151.5%

Purchase of Short-term Investments -$ -$ (16.8)$ (26.7)$ -$ -$ -$ (2.6)$ (31.8)$ -$ 1.4$

1 % change from prev period - - -59.1% 100.0% - - - -1103.8% 100.0% -

Other Investing Changes, Net -$ -$ -$ -$ 34.3$ (1.5)$ 4.4$ (44.2)$ (18.1)$ (24.8)$ (65.0)$

Net Cash From Investing Activities (141.1)$ (116.1)$ (187.2)$ (257.0)$ (155.3)$ (21.3)$ (72.2)$ (219.4)$ (255.3)$ (336.7)$ (371.8)$

1 % change from prev period 17.7% -61.2% -37.3% 39.6% 86.3% -238.7% -203.8% -16.3% -31.9% -10.4%

Cash Flows From Financing ActivitiesIssuance of Capital Stock 4.3$ 6.0$ 35.4$ 14.7$ 10.2$ 31.3$ 38.3$ 15.6$ 63.4$ -$ 22.7$

1 % change from prev period 40.2% 486.8% -58.4% -31.0% 208.1% 22.3% -59.3% 307.0% -100.0% -

Repurchase of Capital Stock -$ -$ -$ -$ -$ -$ -$ -$ (203.4)$ (307.2)$ (501.3)$

Net Issuance of Stock 4.3$ 6.0$ 35.4$ 14.7$ 10.2$ 31.3$ 38.3$ 15.6$ (140.0)$ (307.2)$ (478.6)$

1 % change from prev period 40.2% 486.8% -58.4% -31.0% 208.1% 22.3% -59.3% -998.8% -119.4% -55.8%

Issuance of Debt 60.8$ 174.9$ 66.8$ 990.0$ 789.8$ 606.5$ 3,591.3$ 5,130.0$ 5,851.0$ 6,907.0$ 7,178.6$


Repayment of Debt (0.5)$ (181.7)$ (76.4)$ (841.1)$ (782.0)$ (793.0)$ (3,536.8)$ (4,472.1)$ (4,694.1)$ (5,533.2)$ (6,019.1)$

Net Issuance of Debt 60.2$ (6.8)$ (9.5)$ 148.9$ 7.8$ (186.5)$ 54.5$ 657.9$ 1,156.9$ 1,373.8$ 1,159.5$

1 % change from prev period -111.3% -40.3% 1661.7% -94.7% -2480.4% 129.2% 1107.0% 75.9% 18.7% -15.6%

Dividends Paid -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


Cash from Financing 67.7$ 3.2$ 48.1$ 171.0$ 18.4$ (151.3)$ 101.8$ 683.1$ 1,040.4$ 1,128.4$ 762.5$

Cash at Beginning of the Period 48.7$ 17.1$ 21.8$ 19.5$ 13.0$ 140.6$ 18.3$ 41.1$ 442.7$ 449.4$ 567.4$

Cash at End of the Period 17.1$ 21.8$ 19.5$ 13.0$ 140.6$ 18.3$ 41.1$ 442.7$ 449.4$ 627.9$ 232.5$

Change in Cash (31.5)$ 4.6$ (2.3)$ (6.5)$ 127.6$ (122.3)$ 22.8$ 401.5$ 6.7$ 178.5$ (395.4)$

Free Cash FlowCash from Operations 41.8$ 117.5$ 136.8$ 79.5$ 264.6$ 50.3$ (6.8)$ (62.2)$ (778.4)$ (613.2)$ (786.2)$

Cap Ex 230.1$ 194.4$ 191.8$ 253.1$ 185.7$ 22.4$ 76.6$ 172.6$ 235.7$ 310.3$ 309.6$

Free Cash Flow (188.2)$ (76.9)$ (55.0)$ (173.6)$ 78.9$ 27.9$ (83.3)$ (234.8)$ (1,014.1)$ (923.5)$ (1,095.8)$

1 % change from prev period 59.1% 28.5% -215.8% 145.4% -64.7% -399.1% -181.7% -332.0% 8.9% -18.7%

Free Cash Flow to Equity (FCFE) (20.1)$ 27.5$ (45.8)$ 0.8$ 128.2$ (187.9)$ (46.3)$ 424.0$ 138.9$ 467.5$ 90.1$

1 % change from prev period 236.8% -266.1% 101.8% 15614.1% -246.6% 75.4% 1015.4% -67.2% 236.5% -80.7%

Owner Earnings FCF (2.3)$ 33.3$ 197.1$ 168.6$ (182.3)$ 717.2$ 999.2$ 1,054.0$ 1,844.2$ 1,908.3$ 2,256.6$


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CarMax Inc.

(kmx)11/30/2013 2/28/2014 5/31/2014 8/31/2014

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q3 Q4 Q1 Q2 TTM

Income StatementRevenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cost of Revenues 87.6% 87.4% 87.0% 86.9% 86.1% 85.3% 85.5% 86.2% 86.6% 86.9% 87.0% 87.5% 86.6% 87.1% 87.1%

Gross Profit 12.4% 12.6% 13.0% 13.1% 13.9% 14.7% 14.5% 13.8% 13.4% 13.1% 13.0% 12.5% 13.4% 12.9% 12.9%

Operating Expenses

Selling, General & Admin. Expenses 10.4% 10.4% 10.4% 10.5% 12.7% 11.0% 9.8% 9.4% 9.4% 9.2% 9.7% 9.7% 8.4% 8.3% 8.9%

Research & Development 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

EBITDA 2.4% 2.6% 3.1% 3.2% 2.0% 4.5% 5.6% 5.2% 4.8% 4.7% 4.2% 3.7% 5.7% 5.4% 4.8%

Other Special Charges 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Depreciation & Amortization 0.4% 0.4% 0.5% 0.6% 0.8% 0.8% 0.9% 0.8% 0.9% 0.8% 0.8% 0.9% 0.7% 0.8% 0.8%

Operating Income 2.0% 2.2% 2.6% 2.6% 1.2% 3.8% 4.7% 4.4% 4.0% 3.9% 3.3% 2.8% 5.0% 4.6% 4.0%

Other Income and Expense

Interest Expense 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.4% 0.3% 0.3% 0.2% 0.3% 0.2% 0.2% 0.2% 0.2%

Other Income 1.6% 1.7% 1.8% 1.0% 0.2% 2.3% 2.5% 2.6% 2.7% 0.0% 0.0% 0.0% 2.5% 2.6% 1.4%

Earnings Before Taxes 3.5% 3.8% 4.3% 3.6% 1.4% 6.1% 6.8% 6.7% 6.4% 6.3% 5.9% 5.2% 7.3% 7.0% 6.4%

Income Taxes/(Credit) 1.4% 1.5% 1.7% 1.4% 0.5% 2.3% 2.6% 2.5% 2.4% 2.4% 2.3% 2.0% 2.8% 2.7% 2.5%

Earnings After Taxes 2.1% 2.4% 2.7% 2.2% 0.8% 3.8% 4.2% 4.1% 4.0% 3.9% 3.6% 3.2% 4.5% 4.3% 4.0%

Minority Interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net Income From Continuing

Operations 2.1% 2.4% 2.7% 2.2% 0.8% 3.8% 4.2% 4.1% 4.0% 3.9% 3.6% 3.2% 4.5% 4.3% 4.0%

Net Income From Discontinued

Operations 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net Income From Total Operations 2.1% 2.4% 2.7% 2.2% 0.8% 3.8% 4.2% 4.1% 4.0% 3.9% 3.6% 3.2% 4.5% 4.3% 4.0%

Balance Sheet MRQ

Assets

Cash & Equivalents 2.3% 1.4% 1.0% 0.6% 5.9% 0.7% 0.6% 5.3% 4.5% 5.4% 5.9% 5.4% 4.4% 2.9% 2.9%

Short-Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net Receivables 19.0% 15.8% 14.8% 15.0% 18.2% 26.7% 1.7% 1.0% 0.9% 0.7% 0.6% 0.7% 0.8% 0.9% 0.9%

Inventories 44.6% 44.4% 44.3% 41.8% 29.6% 33.0% 15.3% 13.1% 15.3% 14.0% 13.8% 14.0% 13.8% 13.8% 13.8%

Other Current Assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.5% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3%

Total Current Assets 66.9% 62.4% 61.0% 58.2% 54.1% 60.9% 20.6% 22.2% 23.4% 22.6% 22.6% 22.6% 21.7% 20.3% 20.3%

Fixed Assets 31.4% 33.1% 34.6% 37.0% 39.4% 35.0% 13.5% 15.3% 14.5% 14.1% 14.1% 14.1% 14.0% 14.1% 14.1%

Intangible Assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other Long-Term Assets 1.7% 2.9% 2.3% 2.0% 2.1% 1.9% 64.6% 60.8% 60.7% 62.0% 62.0% 62.0% 63.1% 64.3% 64.3%

Total Long-Term Assets 33.1% 37.6% 39.0% 41.8% 45.9% 39.1% 79.4% 77.8% 76.6% 77.4% 77.4% 77.4% 78.3% 79.7% 79.7%

Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Liabilities & Stockholders' Equity

Accounts payable 13.2% 12.5% 13.5% 13.1% 10.0% 9.9% 3.9% 3.9% 3.4% 3.7% 3.3% 3.7% 3.6% 3.4% 3.4%

Short-Term Debt 5.1% 4.0% 8.0% 4.3% 6.7% 4.8% 2.0% 2.3% 2.0% 2.1% 2.1% 2.1% 2.3% 2.3% 2.3%

Taxes Payable 2.0% 1.6% 0.7% 0.8% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Accrued Liabilities 0.1% 0.4% 1.2% 0.3% 2.3% 3.7% 1.5% 1.5% 1.5% 1.7% 1.2% 1.7% 1.3% 1.7% 1.7%

Other Current Liabilities 0.0% 0.0% 0.0% 0.0% 1.1% 0.2% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.8% 0.0% 0.0%

Total Current Liabilities 25.5% 24.1% 27.2% 21.0% 20.6% 18.7% 7.4% 7.8% 6.9% 7.5% 6.6% 7.5% 7.9% 7.3% 7.3%

Long-Term Debt 9.9% 8.9% 1.8% 9.7% 7.5% 1.1% 57.2% 54.1% 57.4% 60.0% 59.8% 60.0% 60.7% 61.7% 61.7%

Other Liabilities 2.3% 2.1% 4.9% 5.4% 4.9% 4.6% 1.9% 1.8% 1.8% 1.5% 1.7% 1.5% 1.4% 1.4% 1.4%

Deferred Income Taxes 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Long-Term Liabilities 12.6% 11.0% 6.7% 15.2% 12.4% 5.7% 59.1% 60.2% 62.5% 64.2% 64.3% 64.2% 64.7% 65.6% 65.6%

Total Liabilities 38.1% 35.1% 33.8% 36.2% 33.0% 24.4% 66.5% 67.9% 69.5% 71.7% 70.9% 71.7% 72.6% 72.9% 72.9%

Retained Earnings 20.1% 24.7% 30.3% 32.3% 34.2% 42.9% 20.2% 20.9% 20.2% 18.9% 19.6% 18.9% 18.4% 17.8% 17.8%

Preferred Equity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Equity 61.9% 64.9% 66.2% 63.8% 67.0% 75.6% 33.5% 32.1% 30.5% 28.3% 29.1% 28.3% 27.4% 27.1% 27.1%

Total Liabilities & Equity 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cash Flows Statement TTM

Cash Flows From Operating Activities

Net Income 242.1% 114.2% 145.2% 228.9% 22.4% 560.1% -5585.9% -665.7% -55.8% -80.3% -79.8% -80.3% -81.1% -74.2% -67.4%

Depreciation & Amortization 48.1% 22.7% 25.3% 58.6% 20.7% 116.0% -1129.3% -133.2% -12.2% -16.6% -15.0% -16.6% -13.1% -12.8% -13.8%

Deferred Taxes -17.3% -16.2% -10.4% -30.7% -15.7% 59.2% -258.8% 1.4% -0.5% 2.8% 0.9% 2.8% -0.4% 1.5% 2.6%

Other 43.2% 18.4% 26.8% 42.1% 13.4% 79.4% -1055.9% -136.4% -15.2% -35.1% -21.1% -35.1% -25.0% -25.8% -33.2%

Net Cash From Operating Activities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cash Flows From Investing Activities

Capital Expenditures 163.1% 167.5% 102.4% 98.5% 119.5% 105.2% 106.0% 78.7% 92.3% 92.2% 93.1% 92.2% 57.1% 73.6% 83.3%

Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Sale of Assets -63.1% -67.5% -2.4% -0.4% 0.0% -2.1% 0.0% 0.0% 0.0% 0.0% -2.2% 0.0% 0.0% -3.2% -1.6%

Net Cash From Investing Activities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cash Flows From Financing Activities

Issuance of Capital Stock 6.4% 187.7% 73.6% 8.6% 55.3% -20.7% 37.6% 2.3% 6.1% 0.0% 2.1% 0.0% 0.1% 10.8% 3.0%

Repurchase of Capital Stock 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -19.6% -27.2% -21.0% -27.2% -82.9% -107.6% -65.7%

Net Issuance of Stock 6.4% 187.7% 73.6% 8.6% 55.3% -20.7% 37.6% 2.3% -13.5% -27.2% -18.9% -27.2% -82.8% -96.8% -62.8%

Issuance of Debt 89.7% 5441.0% 139.0% 578.9% 4295.4% -400.9% 3527.3% 751.0% 562.4% 612.1% 565.5% 612.1% 914.3% 1095.6% 941.4%

Repayment of Debt -0.8% -5652.5% -158.8% -491.9% -4252.8% 524.2% -3473.8% -654.7% -451.2% -490.4% -448.1% -490.4% -733.9% -907.9% -789.4%

Net Issuance of Debt 89.0% -211.4% -19.8% 87.1% 42.6% 123.3% 53.5% 96.3% 111.2% 121.7% 117.4% 121.7% 180.4% 187.7% 152.1%

Dividends Paid 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Cash from Financing 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

2/16/2015

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CarMax Inc.

(kmx)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 5YR Min Median 5YR Max

Financial Statistics & Ratios

Valuation Ratios Color Coding

P/E 31.21 22.35 28.90 21.61 32.16 18.38 21.19 18.77 22.10 22.45 28.66 18.38 21.65 28.66

P/E (cash adjusted) 30.95 22.21 28.80 21.54 29.78 18.32 21.08 17.70 21.07 21.18 27.98 17.70 21.08 27.98

EV/EBITDA 29.81 21.05 25.74 16.30 14.94 15.69 24.07 23.77 29.06 30.26 35.34 15.69 26.56 35.34

EV/EBIT 35.61 25.10 30.30 19.85 24.48 18.95 28.41 28.26 35.45 36.51 42.47 18.95 31.93 42.47

P/S 0.67 0.53 0.77 0.48 0.27 0.69 0.89 0.78 0.88 0.88 1.12 0.69 0.88 1.12

P/BV 4.40 3.38 4.60 2.64 1.20 2.68 3.49 2.91 3.18 3.33 4.46 2.68 3.26 4.46

P/Tang BV 4.40 3.38 4.60 2.64 1.20 2.68 3.49 2.91 3.18 3.33 4.46 2.68 3.26 4.46

P/CF 16.30 14.91 22.19 12.50 9.54 23.05 22.40 18.06 20.28 19.77 25.36 18.06 21.34 25.36

P/FCF -18.72 -43.02 -104.43 -22.66 24.13 185.89 -96.01 -33.09 -9.47 -11.98 -13.65 -96.01 -12.82 185.89

FCF/S -3.6% -1.2% -0.7% -2.1% 1.1% 0.4% -0.9% -2.3% -9.3% -7.3% -8.2% -9.3% -4.8% 0.4%

FCF Yield -5.3% -2.3% -1.0% -4.4% 4.1% 0.5% -1.0% -3.0% -10.6% -8.3% -7.3% -10.6% -5.2% 0.5%

Magic Formula Earnings Yield 2.8% 4.0% 3.3% 5.0% 4.1% 5.3% 3.5% 3.5% 2.8% 2.7% 2.4% 2.4% 3.2% 5.3%

ROE 14.1% 15.1% 15.9% 12.2% 3.7% 14.6% 16.5% 15.5% 14.4% 14.9% 15.8% 14.4% 15.2% 16.5%

ROA 8.7% 9.8% 10.5% 7.8% 2.5% 11.0% 5.5% 5.0% 4.4% 4.2% 4.3% 4.2% 4.7% 11.0%

ROIC 6.4% 7.3% 8.4% 7.2% 2.7% 8.4% 4.1% 3.5% 2.9% 2.8% 2.9% 2.8% 3.2% 8.4%

CROIC -18.9% -6.5% -3.8% -9.6% 4.1% 1.3% -1.3% -3.0% -11.0% -8.5% -9.4% -11.0% -5.8% 1.3%

GPA (Gross Profitability to Assets) 50.3% 52.4% 51.5% 46.0% 40.7% 43.0% 19.0% 16.5% 14.8% 14.1% 14.0% 14.0% 15.7% 43.0%

Book to Market 22.7% 29.6% 21.7% 37.8% 83.7% 37.3% 28.6% 34.4% 31.5% 30.0% 22.4% 22.4% 30.7% 37.3%

Solvency

Quick Ratio 0.88 0.75 0.61 0.78 1.19 1.49 0.71 1.18 1.16 1.14 0.89 0.71 1.15 1.49

Current Ratio 2.63 2.59 2.25 2.77 2.62 3.26 2.77 2.87 3.38 3.02 2.77 2.77 2.94 3.38

Total Debt/Equity Ratio 0.24 0.20 0.15 0.22 0.21 0.08 1.71 1.69 1.88 2.12 2.28 0.08 1.80 2.28

Long Term Debt/Equity Ratio 0.16 0.14 0.03 0.15 0.11 0.01 1.71 1.69 1.88 2.12 2.28 0.01 1.79 2.28

Short Term Debt/Equity Ratio 0.08 0.06 0.12 0.07 0.10 0.06 0.00 0.01 0.01 0.01 0.01 0.00 0.01 0.06

Efficiency Ratios

Asset Turnover 4.07 4.15 3.96 3.51 2.93 2.92 1.31 1.20 1.11 1.07 1.08 1.07 1.15 2.92

Cash % of Revenue 0.6% 0.3% 0.3% 0.2% 2.0% 0.2% 0.5% 4.4% 4.1% 5.0% 2.7% 0.2% 3.4% 5.0%

Receivables % of Revenue 4.7% 3.8% 3.7% 4.3% 6.2% 9.1% 1.3% 0.9% 0.8% 0.6% 0.8% 0.6% 0.9% 9.1%

SG&A % of Revenue 10.4% 10.4% 10.4% 10.5% 12.7% 11.0% 9.8% 9.4% 9.4% 9.2% 8.9% 8.9% 9.4% 11.0%

R&D % of Revenue 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Liquidity Ratios

Days Sales Outstanding 17.1 13.9 13.7 15.5 22.7 33.3 4.9 3.2 3.1 2.3 3.0 2.32 3.11 33.34

Days Inventory Outstanding 45.6 44.7 47.0 50.0 42.7 48.3 49.9 46.2 58.3 54.8 53.6 46.24 51.76 58.33

Days Payable Outstanding 13.5 12.6 14.3 15.7 14.4 14.5 12.8 13.7 12.9 14.3 13.1 12.83 13.43 14.51

Cash Conversion Cycle 49.2 46.0 46.3 49.8 51.0 67.1 41.9 35.6 48.4 42.9 43.5 35.65 43.17 67.13

Receivables Turnover 21.36 25.80 28.77 26.08 17.82 13.38 22.38 97.11 122.90 146.31 141.61 13.38 110.01 146.31

Inventory Turnover 8.00 8.78 8.63 7.87 7.15 8.24 8.11 8.05 7.28 6.92 6.81 6.81 7.67 8.24

Average Age of Inventory (Days) 45.65 41.59 42.31 46.40 51.02 44.29 45.01 45.33 50.16 52.77 53.61 44.29 47.74 53.61

Intangibles % of Book Value 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Inventory % of Revenue 11.0% 10.7% 11.2% 11.9% 10.1% 11.3% 11.7% 10.9% 13.8% 13.1% 12.8% 10.9% 12.2% 13.8%

Capital Structure Ratios

LT-Debt as % of Invested Capital 12.9% 11.5% 2.4% 12.5% 9.2% 1.3% 61.7% 58.4% 61.5% 64.4% 65.9% 1.3% 61.6% 65.9%

ST-Debt as % of Invested Capital 6.6% 5.1% 10.6% 5.5% 8.2% 5.9% 0.0% 0.2% 0.2% 0.2% 0.2% 0.0% 0.2% 5.9%

LT-Debt as % of Total Debt 66.2% 69.1% 18.2% 69.3% 52.8% 18.2% 100.0% 99.7% 99.7% 99.7% 99.7% 18.2% 99.7% 100.0%

ST-Debt as % of Total Debt 33.8% 30.9% 81.8% 30.7% 47.2% 81.8% 0.0% 0.3% 0.3% 0.3% 0.3% 0.0% 0.3% 81.8%

Total Debt % of Total Assets 15.0% 12.9% 9.8% 14.1% 14.2% 5.9% 57.2% 54.3% 57.5% 60.2% 61.9% 5.9% 57.4% 61.9%

Working Capital % of Price 15.2% 17.5% 11.1% 22.0% 41.9% 20.8% 11.3% 15.5% 16.9% 16.0% 10.8% 10.8% 15.8% 20.8%

Quality Scores

Piostroski F Score 5.00 6.00 5.00 4.00 6.00 6.00 1.00 3.00 2.00 2.00 4.00 1.00 2.50 6.00

Altman Z Score (Original) 9.62 9.23 10.76 7.63 5.41 9.60 3.12 2.77 2.67 2.54 1.71 1.71 2.72 9.60

Altman Z Score (Revised) 11.87 10.97 13.82 9.25 6.15 14.10 4.00 3.64 3.70 3.47 3.22 3.22 3.67 14.10

Beneish M Score (5 Variable) - -1.95 -2.84 -2.68 -2.52 -2.75 5.32 -3.08 -2.85 -2.98 -2.61 -3.08 -2.80 5.32

Beneish M Score (8 Variable) - -1.70 -2.16 -2.05 -2.51 -1.63 2.44 -2.38 -1.85 -2.12 -1.65 -2.38 -1.75 2.44

2/16/2015


Click to Watch

Video Tutorial

CarMax Inc.(kmx)2/16/2015

Figures in Millions except per share values

http://tinyurl.com/6p394ap

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM/MRQ

Balance Sheet Accrual Ratio - 17.7% 20.3% 24.3% -0.8% 14.3% 101.2% 9.6% 19.7% 16.5% 9.4%Cash Flow Accrual Ratio - 13.8% 19.4% 22.4% -2.8% 13.1% 10.9% 10.5% 19.1% 15.7% 16.2%

Sloan Accrual Ratio 16.4% 9.7% 13.2% 15.4% -2.1% 9.9% 6.7% 8.3% 14.8% 12.3% 13.6%

Earnings 0.53$ 0.70$ 0.92$ 0.83$ 0.27$ 1.27$ 1.66$ 1.79$ 1.87$ 2.16$ 2.36$ Stock Price 16.7$ 15.6$ 26.5$ 17.8$ 8.7$ 23.3$ 35.2$ 33.7$ 41.4$ 48.6$ 67.7$

Total Assets 1,293.0$ 1,509.6$ 1,885.6$ 2,333.2$ 2,379.2$ 2,556.2$ 6,839.9$ 8,331.5$ 9,888.6$ 11,707.2$ 12,399.9$ Cash & Equivalent 29.1$ 21.8$ 19.5$ 13.0$ 140.6$ 18.3$ 41.1$ 442.7$ 449.4$ 627.9$ 354.6$ Total Liabilities 492.0$ 529.5$ 638.2$ 844.2$ 786.1$ 622.6$ 4,548.3$ 5,658.4$ 6,869.4$ 8,390.2$ 9,041.9$ Short Term Debt 65.5$ 60.2$ 151.7$ 100.7$ 159.0$ 123.2$ 134.3$ 189.4$ 199.4$ 243.0$ 282.9$ Long Term Debt 128.4$ 134.8$ 33.7$ 227.2$ 178.1$ 27.4$ 3,909.5$ 4,509.8$ 5,672.2$ 7,024.5$ 7,648.3$ Net Operating Assets (NOA) 965.8$ 1,153.4$ 1,413.4$ 1,803.8$ 1,789.5$ 2,065.9$ 6,294.3$ 6,929.6$ 8,441.4$ 9,956.6$ 10,934.6$

Net Income 112.9$ 148.1$ 198.6$ 182.0$ 59.2$ 281.7$ 377.5$ 413.8$ 434.3$ 492.6$ 529.8$ CFO 41.8$ 117.5$ 136.8$ 79.5$ 264.6$ 50.3$ (6.8)$ (62.2)$ (778.4)$ (613.2)$ (786.2)$ CFI (141.1)$ (116.1)$ (187.2)$ (257.0)$ (155.3)$ (21.3)$ (72.2)$ (219.4)$ (255.3)$ (336.7)$ (371.8)$

Balance Sheet Aggregate Accrual -$ 187.5$ 260.0$ 390.4$ (14.3)$ 276.4$ 4,228.4$ 635.3$ 1,511.8$ 1,515.2$ 978.0$ Cash Flow Aggregate Accrual -$ 146.6$ 249.0$ 359.5$ (50.0)$ 252.7$ 456.5$ 695.4$ 1,468.0$ 1,442.4$ 1,687.8$

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

Piotroski F Scores 5 6 5 4 6 6 1 3 2 2 4

Piotroski 1: Net Income 1 1 1 1 1 1 1 1 1 1 1Piotroski 2: Operating Cash Flow 1 1 1 1 1 1 0 0 0 0 0

Piotroski 3: Return on Assets 1 1 1 0 0 1 0 0 0 0 1

Piotroski 4: Quality of Earnings 0 0 0 0 1 0 0 0 0 0 0

Piotroski 5: LT Debt vs Assets 1 1 1 0 1 1 0 1 0 0 0

Piotroski 6: Current Ratio 1 0 0 1 0 1 0 1 1 0 0

Piotroski 7: Shares Outstanding 0 0 0 0 1 0 0 0 0 1 1

Piotroski 8: Gross Margin 0 1 1 1 1 1 0 0 0 0 0Piotroski 9: Asset Turnover 0 1 0 0 0 0 0 0 0 0 1

Earnings growth due to accrual growth is not sustainable. This is like cookie jar accounting where a company “borrows” earnings from the future to make earnings look good today.

Balance sheet accrual can indicate whether capital is being used properly. A company with high accruals can come from acquiring or merging with companies which expands the asset base. Low balance sheet accrual companies tend to shrink their balance sheet through spin offs, share repurchases or large write offs. In these situations, it is usually removing bad performing assets or returning money to shareholders which is always a good use of capital.

High accruals indicate that the company has expanded its asset base rapidly.

Companies with high balance sheet accruals tend to have higher sales growth than low balance sheet accrual companies.

High balance sheet accruals also have a higher ROE.

Remember that maintaining a high sales growth or high ROE is difficult unless you have an entrenched moat. Such companies revert to the mean and disappoint..

Companies with low balance sheet accruals tend to have below average returns on equity. Analysts expect the company to lag.

Color Coding: Green = safe zone, Yellow = ratio is getting into warning zone, Red = Danger zone. Ratios are too high or low. Requires check.

More reading:http://tinyurl.com/7ucpoe2

Earnings Quality Check with Accrual Analysis

Piotroski Score

Enter Ticker Refresh CLEAR

MRQ2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q2

Working Capital 535.6$ 578.4$ 638.5$ 866.9$ 797.0$ 1,079.1$ 901.9$ 1,207.1$ 1,626.0$ 1,767.7$ 1,609.5$

Total Assets 1,293.0$ 1,509.6$ 1,885.6$ 2,333.2$ 2,379.2$ 2,556.2$ 6,839.9$ 8,331.5$ 9,888.6$ 11,707.2$ 12,399.9$

Total Liabilities 492.0$ 529.5$ 638.2$ 844.2$ 786.1$ 622.6$ 4,548.3$ 5,658.4$ 6,869.4$ 8,390.2$ 9,041.9$

Retained Earnings 259.7$ 373.6$ 572.1$ 754.6$ 813.8$ 1,095.5$ 1,383.1$ 1,744.5$ 1,993.8$ 2,214.2$ 2,204.8$

EBITDA 187.3$ 244.1$ 328.7$ 302.0$ 102.9$ 456.0$ 642.9$ 700.6$ 733.7$ 828.2$ 258.0$

Market Value of Equity 3,524.6$ 3,309.4$ 5,739.2$ 3,934.1$ 1,904.0$ 5,178.1$ 8,000.2$ 7,768.4$ 9,599.8$ 11,060.6$ 14,213.5$

Net Sales 5,260.3$ 6,260.0$ 7,465.7$ 8,199.6$ 6,974.0$ 7,470.2$ 8,975.6$ 10,003.6$ 10,962.8$ 12,574.3$ 3,599.2$

Normal Altman Z Score 9.62 9.23 10.76 7.63 5.41 9.60 3.12 2.77 2.67 2.54 1.71Revised Altman Z Score 11.87 10.97 13.82 9.25 6.15 14.10 4.00 3.64 3.70 3.47 3.22

X1 0.15 0.13X2 0.19 0.18X3 0.07 0.02X4 1.32 1.57X5 1.07 0.29

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

M Score - 5 Variable - -1.95 -2.84 -2.68 -2.52 -2.75 5.32 -3.08 -2.85 -2.98 -2.61M Score - 8 Variable - -1.70 -2.16 -2.05 -2.51 -1.63 2.44 -2.38 -1.85 -2.12 -1.65

DSRI - 0.82 0.98 1.14 1.46 1.47 0.15 0.65 0.97 0.76 1.28GMI - 0.98 0.97 0.99 0.94 0.94 1.01 1.05 1.03 1.02 1.01AQI - 2.70 0.97 1.10 1.32 0.65 15.85 0.95 1.00 1.02 1.04SGI - 1.19 1.19 1.10 0.85 1.07 1.20 1.11 1.10 1.15 1.06DEPI - 0.93 1.01 0.98 0.93 0.90 0.80 1.26 0.97 1.08 1.00SGAI - 1.00 1.00 1.01 1.21 0.87 0.89 0.96 1.00 0.98 0.97TATA - 0.02 0.03 0.04 -0.09 0.09 0.06 0.06 0.12 0.09 0.11LVGI - 0.93 0.88 1.06 0.91 0.70 3.27 0.96 1.04 1.05 1.02

When Z is 2.6 or more, the firm is most likely safe based on the financial data. However, be careful to double check as fraud, economic downturns and other factors could cause unexpected reversals.

X4 = Market Value of Equity/Total Liabilities

The Beneish M Score FormulaThe eight variables are then weighted together according to the following:

M = -4.84 + 0.92*DSRI + 0.528*GMI + 0.404*AQI + 0.892*SGI + 0.115*DEPI - 0.172*SGAI + 4.679*TATA - 0.327*LVGI

A score greater than -1.78 indicates a strong likelihood of a firm being a manipulator. In his out of sample tests, Beneish found that he could correctly identify 76% of manipulators, whilst only incorrectly identifying 17.5% of non-manipulators.

The 5 Variable Version of the Beneish ModelThe five variable version excludes SGAI, DEPI and LEVI which were not significant in the original Beneish model.

M = -6.065 + 0.823*DSRI + 0.906*GMI + 0.593*AQI + 0.717*SGI + 0.107*DEPI

A score greater than -1.78 indicates a strong likelihood of a firm being a manipulator.

The Beneish Model - M Score VariablesDSRI = Days' Sales in Receivables Index. Measured as the ratio of days' sales in receivables in year t to year t-1. A large increase in DSR could be indicative of revenue inflation.

GMI = Gross Margin Index. Measured as the ratio of gross margin in year t-1 to gross margin in year t. Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more

likely to manipulate earnings.

AQI = Asset Quality Index. Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.AQI is the ratio of asset quality in year t to year t-1.

SGI = Sales Growth Index. Ratio of sales in year t to sales in year t-1. Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to

manipulate in order to keep up appearances.

DEPI = Depreciation Index. Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t. DEPI greater than 1 indicates that assets are being depreciated at a slower rate.

This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

SGAI = Sales, General and Administrative expenses Index. The ratio of SGA expenses in year t relative to year t -1.

LVGI = Leverage Index. The ratio of total debt to total assets in year t relative to yeat t-1. An LVGI >1 indicates an increase in leverage

TATA - Total Accruals to Total Assets. Total accruals calculated as the change in working capital accounts other than cash less depreciation.

The Z-score formula may be used to predict the probability that a firm will go into bankruptcy within two years.

Z-scores are used to predict corporate defaults and an easy-to-calculate control measure for the financial distress status of companies in academic studies. The Z-score uses multiple corporate income and balance sheet values to measure the financial health of a company.

The main problem with the Altman Z formula is that the formula is not suited for many industries. Industries that operate with high leverage, such as radio and utilities will show a higher risk of bankruptcy.

Also, industries with negative working capital, such as many retail and restaurant companies will also exhibit the same high level of bankruptcy.

(Wikipedia http://en.wikipedia.org/wiki/Z-Score_Financial_Analysis_Tool)

Annual

When Z is 1.8 to 2.7, the company is likely to be bankrupt within 2 years. This is the lower portion of the grey area and a dramatic turnaround of the company is needed.

When Z is below 1.1, the company is highly likely to be bankrupt. If a company is generating lower than 1.8, serious studies must be performed to ensure the company can survive.

When Z is 3.0 or more, the firm is most likely safe based on the financial data. However, be careful to double check as fraud, economic downturns and other factors could cause

unexpected reversals.

When Z is 2.7 to 3.0, the company is probably safe from bankruptcy, but this is in the grey area and caution should be taken.

When Z is below 1.8, the company is highly likely to be bankrupt. If a company is generating lower than 1.8, serious studies must be performed to ensure the company can survive.

X2 = Retained Earnings/Total Assets

X3 = EBITDA/Total Assets

When Z is 1.1 to 2.6, the company is probably safe from bankruptcy, but this is in the grey area and caution should be taken.

X5 = Net Sales/Total Assets

Altman Z Score

MRQ Edit

1.71

Revised Altman Z Score

3.22

Altman Z Score

Revised Altman Z Score

Z = 1.2*X1 + 1.4*X2 + 3.3*X3 + 0.6*X4 + 1.0*X5

There is also a revised Altman Z score which is adjusted for non manufacturing corporations. The revised formula is:

Z = 6.56*X1 + 3.26*X2 + 6.72*X3 + 1.05*X4

X1 = Working Capital/Total Assets

Original Altman Z Score

MRQ Annual MRQ

3.47

Annual

2.54

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTMRevenue 5,260.3$ 6,260.0$ 7,465.7$ 8,199.6$ 6,974.0$ 7,470.2$ 8,975.6$ 10,003.6$ 10,962.8$ 12,574.3$ 13,367.1$ EBIT 103.6$ 138.7$ 194.9$ 214.1$ 85.8$ 280.2$ 422.4$ 438.0$ 433.3$ 493.5$ 538.0$ EBT 184.5$ 240.0$ 323.3$ 297.1$ 96.8$ 452.5$ 608.2$ 666.9$ 701.4$ 797.3$ 858.6$ Interest Expense 2.8$ 4.1$ 5.4$ 5.0$ 6.1$ 3.5$ 34.7$ 33.7$ 32.4$ 30.8$ 30.1$ Income Tax 71.6$ 91.9$ 124.8$ 115.0$ 37.6$ 170.8$ 230.7$ 253.1$ 267.1$ 304.7$ 328.7$ Net Income 112.9$ 148.1$ 198.6$ 182.0$ 59.2$ 281.7$ 377.5$ 413.8$ 434.3$ 492.6$ 529.8$ Total Assets 1,293.0$ 1,509.6$ 1,885.6$ 2,333.2$ 2,379.2$ 2,556.2$ 6,839.9$ 8,331.5$ 9,888.6$ 11,707.2$ 12,399.9$ Shareholders Equity 801.0$ 980.1$ 1,247.4$ 1,488.9$ 1,593.1$ 1,933.6$ 2,291.6$ 2,673.1$ 3,019.2$ 3,317.0$ 3,358.0$

Three-Step DuPont Model:Net Profit Margin (Net Income ÷ Sales) 2.1% 2.4% 2.7% 2.2% 0.8% 3.8% 4.2% 4.1% 4.0% 3.9% 4.0%

Asset Turnover (Sales ÷ Total Assets) 4.07 4.15 3.96 3.51 2.93 2.92 1.31 1.20 1.11 1.07 1.08Equity Multiplier (Total Assets ÷ Shareholders Equity)1.61 1.54 1.51 1.57 1.49 1.32 2.98 3.12 3.28 3.53 3.69

Return on Equity 14.1% 15.1% 15.9% 12.2% 3.7% 14.6% 16.5% 15.5% 14.4% 14.9% 15.8%

Five-Step DuPont Model:Tax Burden (Net Income ÷ EBT) 0.61 0.62 0.61 0.61 0.61 0.62 0.62 0.62 0.62 0.62 0.62Interest Burden (EBT ÷ EBIT) 1.78 1.73 1.66 1.39 1.13 1.62 1.44 1.52 1.62 1.62 1.60Operating Income Margin (EBIT ÷ Sales) 2.0% 2.2% 2.6% 2.6% 1.2% 3.8% 4.7% 4.4% 4.0% 3.9% 4.0%Asset Turnover (Sales ÷ Total Assets) 4.07 4.15 3.96 3.51 2.93 2.92 1.31 1.20 1.11 1.07 1.08Equity Multiplier (Total Assets ÷ Shareholders Equity)1.61 1.54 1.51 1.57 1.49 1.32 2.98 3.12 3.28 3.53 3.69

Return on Equity 14.1% 15.1% 15.9% 12.2% 3.7% 14.6% 16.5% 15.5% 14.4% 14.9% 15.8%

DuPont Analysis

http://www.oldschoolvalue.com/blog/accounting/dupont-analysis-model-spreadsheet/

Full tutorial, example and discussion of how the DuPont analysis is used is provided on the blog.

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

Net Profit Margin (Net

Income ÷ Sales)

Return on Equity

Asset Turnover (Sales ÷

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Total Assets)

CarMax Inc.

(kmx)2/16/2015


Fiscal Comparisons 2005

Revenue 5,260.26$ ↑ 6,259.97$ ↑ 7,465.66$ ↑ 8,199.57$ ↓ 6,973.97$ ↑ 7,470.19$ ↑ 8,975.55$ ↑ 10,003.60$ ↑ 10,962.82$ ↑ 12,574.30$ ↑ 13,367.08$

% difference 19.0% 19.3% 9.8% -14.9% 7.1% 20.2% 11.5% 9.6% 14.7% 6.3%

Accounts receivable 246.28$ ↓ 239.07$ ↑ 279.88$ ↑ 348.97$ ↑ 433.89$ ↑ 682.39$ ↓ 119.60$ ↓ 86.43$ ↑ 91.96$ ↓ 79.92$ ↑ 108.86$

% difference -2.9% 17.1% 24.7% 24.3% 57.3% -82.5% -27.7% 6.4% -13.1% 36.2%

Inventories, raw materials -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$

% difference - - - - - - - - - -

Inventories, work in progress -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$

% difference - - - - - - - - - -

Inventories, purchased components -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$

% difference - - - - - - - - - -

Inventories, finished goods -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$ - -$

% difference - - - - - - - - - -

Inventories, other 576.57$ ↑ 669.70$ ↑ 836.12$ ↑ 975.78$ ↓ 703.16$ ↑ 843.13$ ↑ 1,049.48$ ↑ 1,092.59$ ↑ 1,517.81$ ↑ 1,641.42$ ↑ 1,708.96$

% difference 16.2% 24.8% 16.7% -27.9% 19.9% 24.5% 4.1% 38.9% 8.1% 4.1%

Inventories Total 576.57$ ↑ 669.70$ ↑ 836.12$ ↑ 975.78$ ↓ 703.16$ ↑ 843.13$ ↑ 1,049.48$ ↑ 1,092.59$ ↑ 1,517.81$ ↑ 1,641.42$ ↑ 1,708.96$

% difference 16.2% 24.8% 16.7% -27.9% 19.9% 24.5% 4.1% 38.9% 8.1% 4.1%

Q3 - 11/30/2013 comparisons 2010

Revenue 2,119.13$ ↑ 2,260.51$ ↑ 2,602.45$ ↑ 2,941.41$

% difference 6.7% 15.1% 13.0%

Accounts receivable 66.05$ ↓ 54.52$ ↑ 62.66$ ↑ 68.03$

% difference -17.4% 14.9% 8.6%

Inventories, raw materials -$ - -$ - -$ - -$

% difference - - -

Inventories, work in progress -$ - -$ - -$ - -$

% difference - - -

Inventories, purchased components -$ - -$ - -$ - -$

% difference - - -

Inventories, finished goods -$ - -$ - -$ - -$

% difference - - -

Inventories, other 1,002.98$ ↑ 1,013.18$ ↑ 1,339.04$ ↑ 1,556.28$

% difference 1.0% 32.2% 16.2%

Inventories Total 1,002.98$ ↑ 1,013.18$ ↑ 1,339.04$ ↑ 1,556.28$

% difference 1.0% 32.2% 16.2%

Q4 - 2/28/2014 comparisons 2011

Revenue 2,252.63$ ↑ 2,475.85$ ↑ 2,827.95$ ↑ 3,076.28$

% difference 9.9% 14.2% 8.8%

Accounts receivable 119.60$ ↓ 86.43$ ↑ 91.96$ ↓ 79.92$

% difference -27.7% 6.4% -13.1%


% difference - - -


% difference - - -


% difference - - -


% difference - - -


% difference 4.1% 38.9% 8.1%


% difference 4.1% 38.9% 8.1% More reading:

Q1 - 5/31/2014 comparisons 2011

Revenue 2,679.42$ ↑ 2,774.42$ ↑ 3,311.06$ ↑ 3,750.20$

% difference 3.5% 19.3% 13.3%

Accounts receivable 85.06$ ↓ 65.71$ ↑ 70.45$ ↑ 97.81$

% difference -22.8% 7.2% 38.8%


% difference - - -


% difference - - -


% difference - - -


% difference - - -


% difference 8.4% 15.5% 20.3%


% difference 8.4% 15.5% 20.3%

Q2 - 8/31/2014 comparisons 2011

Revenue 2,587.82$ ↑ 2,758.00$ ↑ 3,245.55$ ↑ 3,599.19$

% difference 6.6% 17.7% 10.9%

Accounts receivable 64.85$ ↑ 70.43$ ↑ 85.55$ ↑ 108.86$

% difference 8.6% 21.5% 27.2%


% difference - - -


% difference - - -


% difference - - -


% difference - - -


% difference 12.9% 13.9% 25.3%


% difference 12.9% 13.9% 25.3%

2012 2013 2014

201420132012

2012 2013 2014

http://goo.gl/trp3vE

2014 TTM

2011 2012 2013

2009 2010 2011 2012 20132006 2007 2008

For any company that sells products, a careful look at the correlation between sales, accounts receivables and inventories is crucial.By using this analysis model you can see the relationship between the rise in revenue, accounts receivables and inventories.

Best scenario is when growth in revenue, accounts receivables and inventory all go up in sync.If accounts receivables or inventories rise quicker than revenue, watch out.

When raw materials advances more rapidly than the work-in-progress and finished goods components, the company is receiving many new orders and an inventory buildup is necessary. The company will simultaneously ship products from its finished goods inventory while ordering raw materials in larger amounts. Increase in raw materials is generally always a good thing.

The main key with inventory is to make sure that finished goods does not overly increase. This indicates that there is not enough demand and the company cannot sell it.

How to Analyze Receivables & Inventory

Enter Ticker

$-

$2,000.00

$4,000.00

$6,000.00

$8,000.00

$10,000.00

$12,000.00

$14,000.00

$16,000.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM $-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Revenue, AR, Inventory Trend

AR Inventory Revenue

CarMax Inc.


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

$0.5 $0.7 $0.9 $0.8 $0.3 $1.3 $1.7 $1.8 $1.9 $2.2 $2.4 12.4% 12.6% 13.0% 13.1% 13.9% 14.7% 14.5% 13.8% 13.4% 13.1% 12.9%

% Change 30.4% 31.6% -9.9% -67.3% 369.5% 30.9% 8.1% 4.5% 15.5% 9.1% % Change 2.2% 3.0% 0.6% 6.1% 6.0% -1.4% -4.9% -3.1% -1.8% -1.2%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

-$2.3 $33.3 $197.1 $168.6 -$182.3 $717.2 $999.2 $1,054.0 $1,844.2 $1,908.3 $2,256.6 2.0% 2.2% 2.6% 2.6% 1.2% 3.8% 4.7% 4.4% 4.0% 3.9% 4.0%

% Change 1579.6% 492.0% -14.5% -208.1% 493.5% 39.3% 5.5% 75.0% 3.5% 18.3% % Change 12.5% 17.8% 0.0% -52.9% 204.8% 25.5% -7.0% -9.7% -0.7% 2.6%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

(188.2)$ (76.9)$ (55.0)$ (173.6)$ 78.9$ 27.9$ (83.3)$ (234.8)$ ####### (923.5)$ ####### -18.7 -43.0 -104.4 -22.7 24.1 185.9 -96.0 -33.1 -9.5 -12.0 -13.7

% Change 59.1% 28.5% -215.8% 145.4% -64.7% -399.1% -181.7% -332.0% 8.9% -18.7% % Change -129.8% -142.7% 78.3% 206.5% 670.2% -151.6% 65.5% 71.4% -26.5% -14.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

-18.9% -6.5% -3.8% -9.6% 4.1% 1.3% -1.3% -3.0% -11.0% -8.5% -9.4% -5.3% -2.3% -1.0% -4.4% 4.1% 0.5% -1.0% -3.0% -10.6% -8.3% -7.3%

% Change 65.4% 41.4% -149.1% 142.8% -67.3% -198.4% -131.0% -261.6% 22.9% -11.5% % Change 56.5% 58.8% -360.8% 193.9% -87.0% -293.6% -190.1% -249.6% 21.0% 12.3%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

2.8% 4.0% 3.3% 5.0% 4.1% 5.3% 3.5% 3.5% 2.8% 2.7% 2.4% 19.9% 22.6% 25.5% 17.5% 5.9% 23.1% 35.3% 28.2% 24.0% 24.2% 26.4%

% Change 41.8% -17.1% 52.6% -18.9% 29.1% -33.3% 0.5% -20.3% -2.9% -14.0% % Change 13.9% 12.5% -31.4% -66.0% 289.9% 52.7% -20.1% -14.8% 0.8% 9.1%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

12.4% 12.6% 13.0% 13.1% 13.9% 14.7% 14.5% 13.8% 13.4% 13.1% 12.9% 2.1% 2.4% 2.7% 2.2% 0.8% 3.8% 4.2% 4.1% 4.0% 3.9% 4.0%

% Change 2.2% 3.0% 0.6% 6.1% 6.0% -1.4% -4.9% -3.1% -1.8% -1.2% % Change 10.2% 12.5% -16.5% -61.8% 344.1% 11.5% -1.6% -4.2% -1.1% 1.2%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

5.0 6.0 5.0 4.0 6.0 6.0 1.0 3.0 2.0 2.0 4.0 9.6 9.2 10.8 7.6 5.4 9.6 3.1 2.8 2.7 2.5 1.7

% Change 20.0% -16.7% -20.0% 50.0% 0.0% -83.3% 200.0% -33.3% 0.0% 100.0% % Change -4.0% 16.5% -29.0% -29.2% 77.7% -67.5% -11.2% -3.5% -4.8% -32.9%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

-1.7 -2.2 -2.0 -2.5 -1.6 2.4 -2.4 -1.8 -2.1 -1.7 38.8% 38.3% 38.6% 38.7% 38.8% 37.8% 37.9% 38.0% 38.1% 38.2% 38.3%

% Change - -27.2% 5.1% -22.6% 35.2% 249.9% -197.6% 22.3% -14.5% 22.0% % Change -1.3% 0.7% 0.4% 0.3% -2.8% 0.5% 0.1% 0.3% 0.4% 0.2%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

24.2% 19.9% 14.9% 22.0% 21.2% 7.8% 170.7% 169.3% 188.4% 212.3% 228.4% -97.1% -39.4% -29.6% -52.9% 23.4% 18.5% -2.1% -5.0% -17.3% -12.7% -13.8%

% Change -17.8% -25.3% 48.1% -3.9% -63.2% 2091.8% -0.8% 11.3% 12.7% 7.6% % Change 59.4% 24.9% -78.7% 144.2% -21.0% -111.1% -142.4% -245.7% 26.4% -8.7%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

24.2% 19.9% 14.9% 22.0% 21.2% 7.8% 170.7% 169.3% 188.4% 212.3% 228.4% -146.6% -57.1% -162.9% -76.4% 44.3% 101.8% -2.1% -5.2% -17.9% -13.1% -14.3%

% Change -17.8% -25.3% 48.1% -3.9% -63.2% 2091.8% -0.8% 11.3% 12.7% 7.6% % Change 61.1% -185.4% 53.1% 158.0% 129.7% -102.1% -144.2% -243.4% 26.5% -9.0%

(kmx)2/16/2015

Operating Margin

Free Cash Flow Price / FCF

Diluted EPS

Owner Earnings

Debt to Equity FCF to Long Term Debt

Gross Margin Net Profit Margin

Piotroski F score Original Altman Z Score

Beneish M Score - 8 Variable Version Tax Rate

Magic Formula Investing -- Earnings Yield Magic Formula Investing -- Return on Capital

Gross Margin

Debt to Equity FCF to Total Debt

Cash Return on Invested Capital (CROIC) FCF Yield


CarMax Inc.

(kmx)

You can get a list of competitors from

kmx

2

Company CarMax Inc.

3 Sector Services

4Industry

Auto

Dealerships

5 Country USA 68 Earnings Date 19-Dec-2014

65 Price $67.68 6 Market Cap $14,213.48 66 Change 1.65% max

67 Volume 1,284,003 60 Change from Open 1.76% max

61 Gap -0.11%55 50-Day High -1.50%56 50-Day Low 19.72%57 52-Week High -1.50%58 52-Week Low 59.10%

7 P/E 27.07 min

8 Forward P/E 23.29 min

9 PEG 1.78 min

10 P/S 1.03 min

11 P/B 4.56 min

12 P/Cash 74.85 min

13 P/Free Cash Flow 0.00 min

14 Dividend Yield 0.00% max15 Payout Ratio 0.00% min

16 EPS (ttm) 2.50

17 EPS growth this year 15.50% max

18 EPS growth next year 11.94% max

19 EPS growth past 5 years 51.60% max

20 EPS growth next 5 years 15.25% max

21 Sales growth past 5 years 12.50% max

22 EPS growth quarter over quarter 27.70% max23 Sales growth quarter over quarter 15.80% max

32 Return on Assets 4.50% max

33 Return on Equity 16.80% max34 Return on Investment 4.50% max

35 Current Ratio 2.80 max

36 Quick Ratio 0.70 max

37 LT Debt/Equity 2.69 min38 Total Debt/Equity 2.77 min

39 Gross Margin 13.00% max

40 Operating Margin 4.10% max41 Profit Margin 4.00% max

24 Shares Outstanding 210.01

25 Shares Float 208.82

26 Insider Ownership 0.40% max

27 Insider Transactions -44.48%

28 Institutional Ownership 0.00%

29 Institutional Transactions -1.20%

30 Float Short 6.88% min31 Short Ratio 8.5

42 Performance (Week) 5.06%

43 Performance (Month) 6.72%

44 Performance (Quarter) 21.07%

45 Performance (Half Year) 33.49%

46 Performance (Year) 42.91%

47 Performance (YTD) 1.65%

48 Beta 1.75

49 Average True Range 1.37

50 Volatility (Week) 1.76%

51 Volatility (Month) 2.17%

52 20-Day Simple Moving Average 5.79%



59 Relative Strength Index (14) 69.44

62 Analyst Recom 2.20

63 Average Volume 1,694.64 64 Relative Volume 0.76

2/16/2015

Manually Enter Competitor into Yellow Cells https://www.google.com/finance?q=kmx

Enter Ticker CLEARUpdate

CarMax Inc. Shares Out. M.O.S Growth Discount % Terminal % Select FCF Adjust 2014 FCF

(kmx) 210.01 3.2% 9.0% Figures in Millions except per share values

2/16/2015

Current Price Fair Value Buy Under Actual M.O.S 52 Wk High 52 Wk Low

$67.68 (69.44)$ ($34.72) 0% $68.71 $42.54

Fiscal Year Trend 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTM

Cash Flow Data

Cash from Operations $41.8 $117.5 $136.8 $79.5 $264.6 $50.3 ($6.8) ($62.2) ($778.4) ($613.2) ($786.2)

Capex ($230.1) ($194.4) ($191.8) ($253.1) ($185.7) ($22.4) ($76.6) ($172.6) ($235.7) ($310.3) ($309.6)

Cash Flow $216.2 $222.0 $258.7 $314.8 $199.6 $224.7 $357.1 $430.2 $473.3 $559.6 $590.0

Free Cash Flow ($188.2) ($76.9) ($55.0) ($173.6) $78.9 $27.9 ($83.3) ($234.8) ($1,014.1) ($923.5) ($1,095.8)

YOY% Change 59.1% 28.5% -215.8% 145.4% -64.7% -399.1% -181.7% -332.0% 8.9% -18.7%

Margins

Gross Margin 12.4% 12.6% 13.0% 13.1% 13.9% 14.7% 14.5% 13.8% 13.4% 13.1% 12.9%

Operating Margin 2.0% 2.2% 2.6% 2.6% 1.2% 3.8% 4.7% 4.4% 4.0% 3.9% 4.0%Net Margin 2.1% 2.4% 2.7% 2.2% 0.8% 3.8% 4.2% 4.1% 4.0% 3.9% 4.0%

EPS & Tax

Diluted EPS $0.53 $0.70 $0.92 $0.83 $0.27 $1.27 $1.66 $1.79 $1.87 $2.16 $2.36Tax Rate 38.8% 38.3% 38.6% 38.7% 38.8% 37.8% 37.9% 38.0% 38.1% 38.2% 38.3%

Efficiency & Profitability

CROIC -18.9% -6.5% -3.8% -9.6% 4.1% 1.3% -1.3% -3.0% -11.0% -8.5% -9.4%

FCF/Sales -3.6% -1.2% -0.7% -2.1% 1.1% 0.4% -0.9% -2.3% -9.3% -7.3% -8.2%

Inventory Turnover 8.0 8.8 8.6 7.9 7.2 8.2 8.1 8.1 7.3 6.9 6.8

Return On Assets (ROA) 8.7% 9.8% 10.5% 7.8% 2.5% 11.0% 5.5% 5.0% 4.4% 4.2% 4.3%Retun On Equity (ROE) 14.1% 15.1% 15.9% 12.2% 3.7% 14.6% 16.5% 15.5% 14.4% 14.9% 15.8%

Debt Related

Debt to Equity 61.4% 54.0% 51.2% 56.7% 49.3% 32.2% 198.5% 211.7% 227.5% 252.9% 269.3%

Capitalization Ratio 13.8% 12.1% 2.6% 13.2% 10.1% 1.4% 63.0% 62.8% 65.3% 67.9% 69.5%

FCF to Total Debt -1.0 -0.4 -0.3 -0.5 0.2 0.2 0.0 0.0 -0.2 -0.1 -0.1

FCF to Short Term Debt -2.9 -1.3 -0.4 -1.7 0.5 0.2 -0.6 -1.2 -5.1 -3.8 -3.9FCF to Long Term Debt -1.5 -0.6 -1.6 -0.8 0.4 1.0 0.0 -0.1 -0.2 -0.1 -0.1

2009-2013 2010-2014 2009-2012 2010-2013 2011-2014 2009-2011 2010-2012 2011-2013 2012-2014 Median

Tang Shareholder Equity 17.3% 14.4% 18.8% 16.0% 13.1% 19.9% 17.6% 14.8% 11.4% 16.0%

Free Cash Flow 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

CROIC -1.3% -3.0% 0.0% -2.2% -5.8% 1.3% -1.3% -3.0% -8.5% -2.2%

FCF/Sales -0.9% -2.3% -0.3% -1.6% -4.8% 0.4% -0.9% -2.3% -7.3% -1.6%

ROA 5.0% 5.0% 5.2% 5.2% 4.7% 5.5% 5.5% 5.0% 4.4% 5.0%

ROE 14.6% 14.9% 15.0% 15.0% 15.2% 14.6% 15.5% 15.5% 14.9% 15.0%

Gross Margin 13.9% 13.8% 14.2% 14.1% 13.6% 14.5% 14.5% 13.8% 13.4% 13.9%

Operating Margin 4.0% 4.0% 4.1% 4.2% 4.2% 3.8% 4.4% 4.4% 4.0% 4.1%

Net Margin 4.0% 4.0% 4.0% 4.0% 4.0% 3.8% 4.1% 4.1% 4.0% 4.0%

Revenue Growth 12.0% 13.9% 12.8% 13.6% 11.9% 13.4% 15.7% 10.5% 12.1% 12.8%

Earnings Growth 62.3% 14.3% 88.0% 13.9% 9.3% 147.9% 19.0% 6.3% 9.9% 14.3%Cash from Ops Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

10 Year Multi-Year Performance2005-2012 2006-2013 2007-2014 2005-2010 2006-2011 2007-2012 2008-2013 2009-2014 2005-2014 Median

Tang Shareholder Equity 18.8% 17.4% 15.0% 19.3% 18.5% 16.5% 15.2% 15.8% 17.1% 17.1%

Free Cash Flow 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

CROIC -3.4% -3.4% -3.4% -5.2% -2.6% -2.2% -2.2% -2.2% -3.0% -3.0%

FCF/Sales -1.1% -1.1% -1.5% -1.0% -0.8% -0.8% -1.5% -1.6% -1.7% -1.1%

ROA 8.3% 6.7% 5.2% 9.3% 8.8% 6.7% 5.2% 4.7% 6.7% 6.7%

ROE 14.8% 14.8% 14.7% 14.3% 14.8% 15.0% 14.5% 14.7% 14.7% 14.7%

Gross Margin 13.4% 13.6% 13.6% 13.0% 13.5% 13.8% 13.8% 13.8% 13.2% 13.6%

Operating Margin 2.6% 3.2% 3.8% 2.4% 2.6% 3.2% 3.9% 3.9% 3.2% 3.2%

Net Margin 2.5% 3.2% 3.8% 2.3% 2.5% 3.2% 3.9% 3.9% 3.2% 3.2%

Revenue Growth 9.6% 8.3% 7.7% 7.3% 7.5% 6.0% 6.0% 12.5% 10.2% 7.7%

Earnings Growth 18.9% 15.2% 13.1% 18.9% 19.0% 14.4% 17.8% 51.6% 16.8% 17.8%Cash from Ops Growth 0.0% 0.0% 0.0% 3.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Projection of future Free Cash Flow2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Yearly Growth Input Field

3% ($953.15) ($983.77) ($1,015.37) ($1,041.47) ($1,068.23) ($1,095.69) ($1,123.84) ($1,145.51) ($1,167.59) ($1,190.09)

Terminal Growth 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034

2% (1,213.89)$ (1,238.17)$ (1,262.93)$ (1,288.19)$ (1,313.96)$ (1,340.24)$ (1,367.04)$ (1,394.38)$ (1,422.27)$ (1,450.72)$

Calculation Sensitivity Matrix: Growth vs Discount RateTotal Cash

MAX(0,Current Liabilities-Current Assets) 7% 8% 9% 10% 11%

Excess Cash -1% (66.25)$ (62.80)$ (59.75)$ (57.03)$ (54.60)$

Adding some Intangibles 1% (71.81)$ (67.83)$ (64.32)$ (61.19)$ (58.40)$

Interest Bearing Debt 3% (78.06)$ (73.49)$ (69.44)$ (65.85)$ (62.66)$

Present Value (10,001.04)$ 5% (85.09)$ (79.83)$ (75.19)$ (71.07)$ (67.41)$

Shares Outstanding 7% (92.99)$ (86.96)$ (81.63)$ (76.91)$ (72.73)$

Per Share Value (47.62)$

Desired Margin of Safety Sensitivity Matrix: Margin of Safety %Purchase Price

Current Price 7% 8% 9% 10% 11%

Margin of Safety 0.0% -1% 13293.2% 12948.4% 12642.7% 12370.7% 12128.0%

1% 13848.9% 13451.5% 13099.6% 12787.0% 12508.3%

Variable Fields 3% 14474.2% 14016.7% 13612.2% 13253.2% 12933.6%

Intangibles% add to DCF 5% 15177.3% 14651.4% 14186.9% 13775.2% 13409.1%

Decay Rate (Yr4E-Yr7E) 7% 15967.3% 15363.6% 14830.9% 14359.4% 13940.5%

Extra Decay (Yr8E-Yr10E)

-$

0%

Discount Rates

Growth Rates

354.16$

25%

Discount Rates

Growth Rates

$4,582.92

20%

0%

67.68$

2%50%

50%

(34.72)$

FCF

354.16$

-$

5 Year Multi-Year Performance

210.011

(69.44)$

(14,583.96)$

Enter Ticker CLEARRefresh

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Video Tutorial


Shares Out. M.O.S Growth Projection EPS Corp Bond

(kmx) 14.8% $2.60 4.30

2/16/2015

Current Price Intrinsic $ Buy Under Actual M.O.S 52 Wk High 52 Wk Low

$67.68 $58.08 $43.56 0% $68.71 $42.54

2009-2013 2010-2014 2009-2012 2010-2013 2011-2014 2009-2011 2010-2012 2011-2013 2012-2014 Median5 Yr EPS Growth 62.3% 14.3% 88.0% 13.9% 9.3% 147.9% 19.0% 6.3% 9.9% 14.3%

2005-2012 2006-2013 2007-2014 2005-2010 2006-2011 2007-2012 2008-2013 2009-201410 Yr EPS Growth 18.9% 15.2% 13.1% 18.9% 19.0% 14.4% 17.8% 51.6%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TTMDiltued EPS 0.53$ 0.70$ 0.92$ 0.83$ 0.27$ 1.27$ 1.66$ 1.79$ 1.87$ 2.16$ 2.36$

2015E 2016EForecast Method 2.23$ 2.56$

Linear Regression Method 2.25$ 2.58$

Normalized Margins Method 2.58$ 2.96$ Analyst Estimate 2.60$ 2.91$

Normal Earnings 2.60$

Growth Rate 14.83%

Corp Bond Rate 4.30 Per Share Value 58.08$

MOS 25%Purchase Price 43.56$ Current Price $67.68Actual Discount 0%

Growth Sensitivity Increment 10%EPS Sensivity Increments 10%

Graham's Sensitivity Matrix

Median17.8%

Graham Value Calculation

25%210.01Analyst Estimate

CarMax Inc.


$0.53 $0.70 $0.92 $0.83

$0.27

$1.27 $1.66 $1.79 $1.87

$2.16 $2.60

$2.99

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E

2.08$ 2.34$ 2.60$ 2.86$ 3.12$

11.9% 40.15$ 45.17$ 50.19$ 55.20$ 60.22$

13.3% 43.30$ 48.72$ 54.13$ 59.54$ 64.96$

14.8% 46.46$ 52.27$ 58.08$ 63.88$ 69.69$

16.3% 49.62$ 55.82$ 62.02$ 68.22$ 74.43$

19.6% 56.56$ 63.63$ 70.70$ 77.77$ 84.84$

EPS

Growth

Click to Watch

Video Tutorial

CarMax Inc.Normalized Rev

Period Projection EPS Figures in Millions except per share values

(kmx) $2.60

2/16/2015

Current Price Conservative Normal Aggressive

$67.68 $43.39 $61.94 $83.13M.o.S 0.0% 0.0% 18.6%

For Each Operating Segment (1) Conservative Normal Case Aggressive

Normalized Revenue Estimate (2) 13,668.7 $13,668.7 13,668.7

Manual Input for Revenue

Projected Normalized Operating Margin (3) 4.1% 4.1% 4.1%

Operating Income Estimate (EBIT) 556.3 556.3 556.3

Valuation Multiple (4) 30x 37x 45x

Estimate Value of Operating Segment 16,689.9 20,584.2 25,034.9

Cash & Equiv on Balance Sheet 354.6 354.6 354.6

Manual Input for Cash & Equiv

Total Value of business + cash 17,044.5 20,938.8 25,389.5

Less Total Debt 7,931.2 7,931.2 7,931.2

Manual Input for Total Debt

Less Off Balance Sheet Debt (5) 0.0 0.0

Less Net Pension/Retirement/Workers Comp 0.0 0.0

Estimated Fair Value of Equity 9,113.3 13,007.6 17,458.2

Shares Outstanding 210.01 210.01 210.01

Current Price $67.68 $67.68 $67.68

Estimated Fair Value per Share $43.39 $61.94 $83.13

Margin of Safety 0% 0% 19%Price/Intrinsic Value Ratio (6) 1.6 1.1 0.8

Enter the operating margin for each scenario.

3YR Analyst Estimate

Enter values in the yellow boxes.

Make sure to keep your denominations consistent. E.g. use millions for rev & shares outstanding.

Do not use millions for revenue and thousands for shares outstanding.

How to Use

Calculator Input Explanations

(1) For Each Operating Segment:EBIT multiple calculation can be used for sum of the parts valuation.

Perform the same step for each part of the operating business and then sum it up to get the total value.

(2) Normalized Revenue EstimateTo get a normalized value, take the average or median across multiple years.

(3) Projected Normalized Operating Margin

Enter the EBIT multiple that you wish to use for each scenario. Look at comparable industry and competitor levels if you are unsure.

These are liabilities that are not found in the balance sheet. It can be found in the footnotes of the annual reports.

A quick way to search for this is to do a find for the term "off balance sheet" or "off-balance sheet" in the filings.

The lower the better. Simply price divided by the calculated intrinsic value of equity.

(4) Valuation Multiple

(5) Less Off Balance Sheet Debt

(6) Price/Intrinsic Value Ratio


Watch

CarMax Inc. Current EPS

Exp Growth Dividend Yield

Business

Safety

Financial

Safety

Earnings

Safety

(kmx) 25% 0.00% Below AverageAbove AverageBelow Average

2/16/2015 Expected PE 9 of 20 pts 12 of 20 pts 8 of 20 pts

Katsenelson Absolute PE Current Price Fair Value Fair Value PE Current PE FV Exp Grth M.O.S

$67.68 $61.99 26.25 27.07 25% 0%

Determine Business Risk 2010 2011 2012 2013 2014 TTM AVERAGE STDEV

ROE 14.57% 16.47% 15.48% 14.38% 14.85% 15.78% 15.3% 0.8%Consistency/quality check 1 0 0 1 1 3

ROA 11.02% 5.52% 4.97% 4.39% 4.21% 4.27% 5.7% 2.6%Consistency/quality check 0 0 0 0 1 1

CROIC 1.34% -1.32% -3.04% -10.99% -8.47% -9.45% -5.3% 5.0%Consistency/quality check 0 0 0 0 0 0

Intangibles % of Book Value 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.0% 0.0%Consistency/quality check 1 1 1 1 1 5

Business Risk Factor: 9 pts out of 20 Below Average -2% Factor 9 0.0%

Determine Financial Risk 2010 2011 2012 2013 2014 TTM AVERAGE STDEV

Current Ratio 3.26 2.77 2.87 3.38 3.02 2.77 3.01 0.26Consistency/quality check 1 1 1 1 1 5

Total Debt/Equity Ratio 0.08 1.71 1.69 1.88 2.12 2.28 1.63 0.79Consistency/quality check 0 1 0 0 0 1

Short Term Debt/Equity Ratio 0.06 0.00 0.01 0.01 0.01 0.01 0.01 0.02Consistency/quality check 1 1 1 1 1 5

FCF to Total Debt 18.50% -2.06% -5.00% -17.27% -12.71% -13.82% -5.4% 13.0%Consistency/quality check 0 0 0 1 0 1

Financial Risk Factor: 12 pts out of 20 Above Average 2% Factor 12 0.0%

Determine Earnings Predictability 2010 2011 2012 2013 2014 TTM AVERAGE STDEV

Gross Margin 14.71% 14.50% 13.78% 13.36% 13.11% 12.95% 13.7% 0.7%Consistency/quality check 0 0 0 0 0 0

Net Margin 3.77% 4.21% 4.14% 3.96% 3.92% 3.96% 4.0% 0.2%Consistency/quality check 1 0 0 0 1 2

Earnings $1.27 $1.66 $1.79 $1.87 $2.16 $2.36 1.85 0.38Consistency/quality check 1 1 1 1 1 5

Cash from Ops $50.29 -$6.76 -$62.16 -$778.44 -$613.16 -$786.17 -$366.07 400.60Consistency/quality check 0 0 0 1 0 1

Earnings Predict. Factor: 8 pts out of 20 Below Average -3% Factor 8 0.0%

Katsenelson Absolute PE Valuation ModelEarnings Growth 25.00% 27.07Dividend Yield 0.00% 0.00

=Adjusted Base PE 27.07

xBusiness Risk Below Average [1 + (1 - 1.02)]Premium/Discount Factor: 1.02 xFinancial Risk Above Average [1 + (1 - 0.98)]Premium/Discount Factor: 0.98 xEarnings Predictability Below Average [1 + (1 - 1.03)]Premium/Discount Factor: 1.03 =Adjusted Fair Value PE 25% 26.25


P/E Exp EPS Grwth Rate Dividend Yield Add'l P/E Points

7.00 0% 0.0% 0.0

7.65 1% 0.1% 0.5

8.30 2% 0.5% 0.5

8.95 3% 1.0% 1.0

9.60 4% 1.5% 1.5

10.25 5% 2.0% 2.0

10.90 6% 2.5% 2.5

11.55 7% 3.0% 3.0

12.20 8% 3.5% 3.5

12.85 9% 4.0% 4.0

13.50 10% 4.5% 4.5

14.15 11% 5.0% 5.0

14.80 12% 5.5% 5.5

15.45 13% 6.0% 6.0

16.10 14% 6.5% 6.5

16.75 15% 10.0% 10.0

17.40 16%

17.90 17%

18.40 18%

18.90 19%

19.40 20%

19.90 21%

20.40 22%

20.90 23%

21.40 24%

21.90 25%

∆0.65

∆0.50


CarMax Inc. Shares Out. Main. Capex Normalized Income Discount Rate R&D Years SG&A %

(kmx) 210.01 $92.49 $150.82 25%

2/16/2015

Current Price EPV Net Reproduction Value EPV MOS NCAV 52 Wk High 52 Wk Low

$67.68 ($36.59) $58.42 0.0% ($31.07) $68.71 $42.54

Asset Valuation Section EPV Valuation Section

Data: Asset Valuation EPV > Net Repro Value = Moat exists

Shares Outstanding 210.0 TTM Free Cash Flow (1,095.8)$ EPV = Net Repro Value = No MoatBalance Sheet Assets 11,945.7$ Avg Normalized Income 444.5$ EPV < Net Repro Value = Value DestroyerAdjusted Assets 11,945.7$ Med Normalized Income 445.1$ Total Liabilities 9,041.9$ Avg Adj. Income 5 yrs 422.4$ Total Equity 3,358.0$ TTM Adjusted Income 537.8$

Average SGA % 9.7%

Marketing/Brand Value 1,225.9$ Data: EPVR&D Value -$ Cost of Capital 9.0%

Cash Needed for Business 133.7$ Normalized Adjusted Income 150.8$ Interest Bearing Debt 8,552.6$ Average Maintenance Capex 92.5$ Non Interest Bearing Debt 800.0$ Interest Bearing Debt 8,552.6$ Excess Cash 103.1$ 1% of sales 133.7$

Cash & Equiv 354.6$

Calculation: Asset Valuation Cash - Debt (8,331.7)$

Total Per Share Shares 210.01

Tangible BV 2,903.74$ 13.83$

Adjusted BV 2,903.74$ 13.83$ Calculation: EPVNCAV (6,525.48)$ (31.07)$ Cost of Capital Rates EPV Per Share + Cash - Debt Per ShareReprod. Cost of Assets 13,171.59$ 62.72$ 5% 1,166.7$ 5.56$ (7,165.0)$ (34.12)$ Reprod. Cost of Assets BV 4,129.66$ 19.66$ 7% 833.4$ 3.97$ (7,498.3)$ (35.70)$ Total Net Reprod. Cost 12,268.45$ 58.42$ 9% 648.2$ 3.09$ (7,683.5)$ (36.59)$

11% 530.3$ 2.53$ (7,801.3)$ (37.15)$ 13% 448.7$ 2.14$ (7,882.9)$ (37.54)$

Quarterly numbers based on: Q2Adjustments:

Assets Book Value Fixed BV Multiplier

Reproduction Asset Value

Cash & Equivalents 354.6$ 354.6$

Marketable Securities -$ -$

Adjustments:

Liabilities & Equity Book Value Fixed BV Multiplier

Reproduction Liability Value

Accounts Receivable 108.9$ 108.9$ Accounts Payable 418.3$ 418.3$ Other Receivable -$ -$ Accrued Expenses -$ -$ Net Receivables 108.9$ 108.9$ Accrued Liabilities 205.5$ 205.5$

Inventories: Raw Materials -$ Notes Payable/Short Term Debt 282.9$ 282.9$

Inventories: Work in Progress -$

Current Port. of LT Debt/Capital Leases 310.7$ 310.7$

Inventories: Purchased Components -$ Other Current Liabilities 0.2$ 0.2$

Inventories: Finished Goods -$ Total Current Liabilities 1,217.6$ 1,217.6$ Inventories: Other 1,709.0$ Long-Term Debt 7,648.3$ 7,648.3$ Inventories -- Total 1,709.0$ 1,709.0$ Capital Lease Obligations 310.7$ 310.7$ Prepaid Expenses -$ -$ Deferred Income Taxes -$ -$ Current Defered Income Taxes 8.3$ 8.3$ Total Other Liabilities 176.0$ 176.0$

Other Current Assets 38.7$ 38.7$ Total Liabilities 9,041.9$ 9,041.9$ Total Current Assets 2,219.4$ 2,219.4$ Common Stock Equity 3,358.0$ 3,358.0$ Goodwill, Net -$ -$ Retained Earnings 2,204.8$ 2,204.8$ Intangibles, Net -$ -$ Total Capitalization 11,006.3$ 11,006.3$

Intangibles -$ -$ Total Equity 3,358.0$ 3,358.0$ Property/Plant/Equipment - Net 1,754.0$ 1,754.0$ Total Liabilities & Equity 12,399.9$ 12,399.9$

Other Long Term Assets, Total 7,972.3$ 7,972.3$ Total Assets 11,945.7$ 11,945.7$

9% 3

Values for Normalized Income


-$60

-$40

-$20

$0

$20

$40

$60

$80

Book Value Net Repro Value EPV

CarMax Inc.

(kmx) Figures in Millions except per share values

2/16/2015 Current Price NNWC NNWC % NCAV NCAV %

$67.68 -$36.91 0.0% -$31.07 0.0%

Figures in Millions except per share values BV

BV

Multiplier Net Net Value

Cash & Equivalents 354.60$ 100% 354.60$ Marketable Securities -$ Accounts Receivable 108.86$ 75% Other Receivable -$ Receivables 108.86$ 81.64$ Inventories: Raw Materials -$ 50% Inventories: Work in Progress -$ Inventories: Purchased Components -$ Inventories: Finished Goods -$ Inventories: Other 1,708.96$ Inventories -- Total 1,708.96$ 854.48$ Current Assets - Total 2,516.44$ 2,516.44$ Total Assets 12,399.91$ 12,399.91$ Total Liabilities 9,041.93$ 9,041.93$ Shares Outstanding 210.01 210.01

Total ($M) Per Share

Total Current Assets 2,516.44$ 11.98$ Market Cap & Share Price 14.214B 67.68$

Book Value 3,357.99$ 15.99$ Net Net Working Capital (7,751.20)$ (36.91)$

Discount to NNWC 0%

Net Current Asset Value (6,525.48)$ (31.07)$ Discount to NCAV 0%

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2010 2011 2012 2013

5,459.2$ 6,208.7$ 7,201.9$ 8,377.8$ 14% 16% 16%

2014 CAGR

9,616.0$ 12%15%

Key StatisticsShare Price (3/12/14) 235.00$ Mkt Cap ($M) 33,624.25$

Enterprise Value ($M) TTM 37,984.27$ 2010

52 Wk High 275.09$ Revenue $5,459.20

52 Wk Low 215.09$ Growth

% off 52Wk Low 9.7% EPS $6.55

Growth

2011 2012 2013 2014 CAGR

$6,208.70 $7,201.90 $8,377.80 $9,616.00 12%

14% 16% 16% 15%

$7.10 $8.48 $9.79 $12.20

8% 19% 16% 25% 17%

Revenu

e 47,348.0$ 50,514.0$ 53,324.0$ 61,095.0$ 63,747.0$ 61,897.0$

Free

Cash

Flow 8,956.0$ 9,245.0$ 11,510.0$ 11,939.0$ 11,906.0$ 14,206.0$

19% 18% 22% 20% 19% 23%

61,587.0$ 65,030.0$ 67,224.0$ 71,312.0$ 74,432.0$

14,001.0$ 11,405.0$ 12,462.0$ 13,819.0$ 14,598.0$

23% 18% 19% 19% 20% 20%

KMX OSV

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