4. LKQ Corporation (NASDAQ:LKQ)
Forward PE ratio as of September 11: 10.10
Average Analyst Price Target Upside Potential: 45.20%
Number of Hedge Fund Holders: 31
LKQ Corporation (NASDAQ:LKQ) is an auto parts Company that distributes replacement parts, components, and systems used in the repair and maintenance of vehicles. It distributes bumper covers, automotive body panels, lights, mechanical automotive parts, and accessories.
LKQ Corporation (NASDAQ:LKQ) holds a significant position in the vehicle replacement parts industry. This market is somewhat consistent due to its expansion opportunities being linked to the mileage of light vehicles.
Its worldwide presence positions it as the top contender in North America and Europe. The company intends to leverage its size, accumulated through approximately 300 acquisitions, to secure a larger market share by maintaining a greater inventory of car parts than its rivals.
LKQ Corporation (NASDAQ:LKQ) is one of the best undervalued cyclical stocks to buy, according to analysts, as it is in a phase of robust growth depicted by solid Q2 2024. The auto parts company has prioritized strategic pillars of profitable revenue growth, margin enhancement, and cash flow generation while enhancing operational excellence to maximize our performance.
Consequently, revenues in the second quarter increased by 7.6% to $3.4 billion as net income dropped to $185 million from $281 million as of last year’s same quarter. Cash flow from operations and free cash flow were $213 million and $133 million, respectively.
LKQ Corporation (NASDAQ:LKQ)’s revenue growth in the past year has grown by 12.25%. Additionally, the company has demonstrated a strong gross profit margin of 39.36%, showing that it’s boosting its sales and efficiently handling its production costs, resulting in improved profitability.
During the second quarter of 2024, the company returned over $200 million to its shareholders, $125 million to repurchase shares, and about $80 million in cash dividends, affirming its ability to remain valuable to shareholders.
According to Insider Monkey’s second-quarter database, 31 hedge funds were bullish on LKQ Corporation (NASDAQ:LKQ), compared to 23 funds in the preceding quarter. Israel Englander’s Millennium Management is the leading stakeholder of the company, with 1.24 million shares worth $51.41 million.
Wall Street analysts maintain an average buy rating on the stock with a $56.60 price target, implying a 45.20% upside potential from current levels.
Aristotle Small/Mid Cap Equity Strategy stated the following regarding LKQ Corporation (NASDAQ:LKQ) in its fourth quarter 2023 investor letter:
“LKQ Corporation (NASDAQ:LKQ), a North American market leader in alternative collision repair parts with expertise stemming across used, recycled, refurbished, and remanufactured collision repair parts as well as the market for (new) aftermarket collision repair, was added to the portfolio. Overall, we believe the company maintains favorable scale advantages that allow for volume purchase discounts from suppliers and a wider distribution network, higher fill rates, and faster response times relative to competition. Furthermore, the company has made investments in improving its technology and logistics network beyond that of its smaller competitors, which we believe will further cement its market position through technological sophistication.”
