Is CarMax, Inc. overvalued or undervalued?

As of 20 June 2025, the valuation grade for CarMax, Inc. has moved from fair to attractive, indicating a more favorable assessment of its market position. The company appears to be undervalued, particularly when considering its P/E ratio of 20, which is higher than the peer Penske Automotive Group's P/E of 12.91, and its EV to Sales ratio of 1.06, which suggests a more favorable valuation compared to industry peers. Additionally, CarMax's PEG ratio of 2.76 indicates potential growth that is not fully reflected in its current price.
In terms of peer comparison, CarMax's EV to EBITDA stands at a significantly high 167.14, while Penske Automotive Group's is much lower at 14.17, highlighting a stark contrast in valuation metrics. The company's recent stock performance has been underwhelming, with a year-to-date return of -26.61% compared to the S&P 500's 12.22%, which may reinforce the perception of undervaluation as the market has not yet recognized its potential.