We came across a bullish thesis on Motorcar Parts of America, Inc. (MPAA) on Substack by Tyler Moody. In this article, we will summarize the bulls’ thesis on MPAA. Motorcar Parts of America, Inc. (MPAA)’s share was trading at $10.80 as of Feb 28th. MPAA’s forward P/E was 9.29 according to Yahoo Finance.
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Motorcar Parts of America (MPAA) delivered a strong fiscal Q3 2025, with sales rising 8.3% and gross profit surging 49%, driven by significant improvements in operational efficiency. Although net income was modest at $2.3 million, it marked a clear recovery from last year’s loss of $2.40 per share. The company demonstrated disciplined financial management by reducing bank debt by $30 million, bringing it down to $84 million from $114 million. Gross margins expanded sharply from 17.5% to 24.1%, aided by a $3.9 million reduction in interest expenses and enhanced manufacturing efficiencies, particularly in brake products.
Alternator sales remained robust despite broader industry headwinds, reinforcing MPAA’s position in a market where its products are critical for vehicle operation. The company’s management emphasized that its core parts—alternators, starters, and brakes—are essential replacements, making demand relatively inelastic. With the average vehicle age approaching 13 years, the need for replacement parts remains a key long-term tailwind. The recent margin improvement was particularly driven by better efficiencies in brake manufacturing, a newer segment that initially weighed on profitability.
Tariff concerns were addressed by management, with the CEO affirming that MPAA would pass any surcharge on Chinese imports to customers while actively diversifying sourcing. The potential for tariffs on Mexican imports was downplayed, as management views them as a negotiation tactic. Interest expenses remain a key challenge, but the company’s debt reduction efforts should help mitigate the impact.
MPAA’s equity value stands at $262 million, with 19.72 million shares outstanding and a book value of $13.30 per share. The company’s ongoing operational improvements, deleveraging efforts, and stable demand outlook present a compelling case for investors, particularly as profitability continues to recover.
Motorcar Parts of America, Inc. (MPAA) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held MPAA at the end of the fourth quarter which was 11 in the previous quarter. While we acknowledge the risk and potential of MPAA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MPAA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.