Americas Car-Mart Q1 FY26 slides: Improved customer mix despite stock plunge

Introduction & Market Context

Americas Car-Mart Inc (NASDAQ:CRMT) released its Q1 FY26 supplemental presentation slides on September 4, 2025, highlighting improvements in customer quality and application volume. Despite these positive indicators, the company’s stock plunged 12.65% in premarket trading to $39, significantly below its 52-week high of $62.72.

The sharp decline follows what had been a period of recovery for the used car retailer, which had reported a strong Q4 FY25 with earnings per share of $1.26, exceeding analyst expectations of $0.99. Today’s negative market reaction suggests investors may have concerns beyond the metrics highlighted in the presentation.

Quarterly Performance Highlights

A key focus of Americas Car-Mart’s Q1 FY26 presentation was the improvement in customer quality mix. The company reported a significant 15% increase in higher-ranked customers (rankings 5-7) compared to the FY25 average.

As shown in the following chart of booked applications by customer rank:

The data reveals that applications from the highest-quality customers (ranks 5-7) increased substantially, while lower-ranked customers (ranks 1-3) decreased. Specifically, rank 7 customers increased by 6.7%, rank 6 by 21.2%, and rank 5 by 17.0%. Conversely, applications from the lowest-quality customers (rank 1) decreased by 48.9%.

This shift toward higher-quality customers follows the June 2025 launch of LOS V2, an upgraded underwriting platform with improved predictive scorecard capabilities.

Detailed Financial Analysis

The presentation highlighted strong customer demand, with credit applications increasing 10% year-over-year. The following chart illustrates this growth trend across recent quarters:

Application volume showed consistent growth compared to the previous year across all quarters, with increases of 10.6% in Q1 FY25, 16.4% in Q2 FY25, 14.8% in Q3 FY25, and 8.5% in Q4 FY25. This sustained demand suggests the company continues to attract interest despite broader economic challenges.

Americas Car-Mart also reported improving financial returns on its loan portfolio. The following chart shows the trend in Cash-on-Cash returns and Internal Rate of Return (IRR):

The projected IRR has increased consistently from 66.0% in FY20-Q4 to 83.7% in FY26-Q1, while the Current Actual/Projected Cash-on-Cash Return improved from 36.3% in FY22 to 49.2% in FY26-Q1. The company attributes these improvements to enhanced underwriting processes, the new LOS platform, and risk-based pricing strategies.

Strategic Initiatives

The presentation indicates that Americas Car-Mart is focusing on several strategic initiatives to improve its financial performance. The launch of LOS V2 in June 2025 represents a significant investment in technology to enhance the company’s underwriting capabilities and customer selection process.

The shift toward higher-quality customers appears to be a deliberate strategy to improve loan performance and reduce charge-offs, which had been a challenge in previous quarters. This aligns with CEO Doug Campbell’s comments from the Q4 earnings call, where he described FY25 as a "defining year" for the company’s operational and financial turnaround.

Forward-Looking Statements

While the presentation focuses on positive trends in customer quality and application volume, it provides limited forward guidance. The improvement in projected IRR and Cash-on-Cash returns suggests the company expects its loan portfolio to perform better in coming quarters.

This optimism builds on the company’s previous statements about targeting gross margins of 37-38% and returning to a normal securitization cadence of 2-3 times per year, as mentioned in their Q4 FY25 earnings call.

Analyst Perspectives

The significant stock drop following this presentation suggests investors may have concerns not directly addressed in the slides. Potential issues could include:

1. The broader macroeconomic environment and its impact on Americas Car-Mart’s customer base

2. Rising costs that might offset the benefits of improved underwriting

3. Competitive pressures in the used car financing market

4. Questions about the sustainability of application volume growth

The company’s high P/E ratio of 42.56 (as of the previous quarter) may also be contributing to the stock volatility, as it suggests investors had priced in significant growth expectations that now appear to be in question.

While Americas Car-Mart’s Q1 FY26 presentation highlights several positive operational trends, particularly in customer quality and application volume, the market’s negative reaction indicates investors may need more comprehensive information about the company’s overall financial performance before regaining confidence.

Full presentation:

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