LKQ (LKQ) Valuation Check After 22% Share Price Slide Despite Ongoing Revenue and Earnings Growth

LKQ (LKQ) has quietly slipped over the past year, with the stock down roughly 22% even as revenue and net income keep inching higher. That gap between fundamentals and share price is worth unpacking.

See our latest analysis for LKQ.

Recent swings have been more about sentiment than fundamentals, with a 1 year to date share price return of negative 18.7 percent and a 3 year total shareholder return of negative 39.9 percent signaling fading momentum despite steady earnings progress.

If LKQ's pullback has you rethinking where the next opportunity might come from, this could be a good moment to explore auto manufacturers for other ideas in the auto space.

With revenue and earnings still growing and the stock trading at a steep discount to analyst targets, investors now face a key question: Is LKQ mispriced value, or are markets already discounting its future growth?

Most Popular Narrative Narrative: 44.2% Undervalued

According to julio, the narrative pegs LKQ’s fair value far above the recent 29.45 dollar close, implying a sizable disconnect between modeled cash flows and market pricing.

Growth in miles driven increases the wear and tear on vehicles, requiring more maintenance and repair work to keep them on the road, benefiting LKQ.

LKQ’s collision business could see rising demand from increasing auto claims as more drivers return to the road following the COVID 19 pandemic.

Read the complete narrative.

Curious how modest top line expansion, higher margins and a richer future earnings multiple combine to justify that gap to fair value? The narrative’s growth math might surprise you.

Result: Fair Value of $52.8 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, several headwinds, from accident reducing ADAS technology to execution risks in the 1 LKQ Europe integration, could undermine those bullish cash flow assumptions.

Find out about the key risks to this LKQ narrative.

Build Your Own LKQ Narrative

If you see the story differently or want to dig into the numbers yourself, you can easily build a custom view in just minutes with Do it your way.

A great starting point for your LKQ research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Before you move on, put Simply Wall Street’s tools to work so you do not miss the next wave of compelling opportunities beyond LKQ.

• Capitalize on beaten down quality by scanning these 906 undervalued stocks based on cash flows that still have the fundamentals to support a meaningful rerating.
• Ride structural innovation trends by targeting these 26 AI penny stocks positioned at the heart of the artificial intelligence transformation.
• Lock in potential income streams by focusing on these 15 dividend stocks with yields > 3% that offer attractive, above market yields with room for growth.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com