CarMax’s Stock Gained 30%, Room For More?

CarMax’s stock (NYSE: KMX) has gained around 33% over the last month to levels of around $121 currently. But will the company’s stock see higher levels over the coming weeks, or is a decline in the stock imminent?

According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price, returns for CarMax KMX stock average around 2.0% in the next one-month (21 trading days) period after experiencing a 1.1% decline in a week (5 trading days). Notably, the stock is very likely to outperform the S&P500 over the next month (21 trading days), with an expected excess return of 1%.

But how would these numbers change if you are interested in holding KMX stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test KMX stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF KMX stock moved by -5% over 5 trading days, THEN over the next 21 trading days, KMX stock moves an average of 2.0%, which implies an excess return of 1.3% compared to the S&P500.

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More importantly, there is a 54% probability of a positive return over the next 21 trading days and a 46% probability of a positive excess return after a -5% change over 5 trading days.

Some Fun Scenarios, FAQs & Making Sense of CarMax Stock Movements:

Question 1: Is the average return for CarMax stock higher after a drop?

Answer: Consider two situations,

Case 1: CarMax stock drops by -5% or more in a week

Case 2: CarMax stock rises by 5% or more in a week

Is the average return for CarMax stock higher over the subsequent month after Case 1 or Case 2?

KMX stock fares better after Case 2, with an average return of 2.7% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 5.4% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how CarMax stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold CarMax stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For KMX stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for CarMax after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although KMX stock appears to be an exception to this general observation.

KMX’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for CarMax stock by changing the inputs in the charts above.

While CarMax’s stock may have moved, 2020 has created many pricing discontinuities that can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Amazon vs Etsy.

See all Trefis Price Estimates and Download Trefis Data here

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