10Y annualized return is
positive but below market average
at 2.8% per year
LKQ has met or exceeded earnings expectations in
few
recent quarters (4/10)
Attractive Price-to-Sales Ratio
Reasonable P/E Ratio
Strong Gross Profit Margin
Decent Return on Equity
Strong Current Ratio
Good Interest Coverage
🏆 Strong Operational Excellence
📈 Effective Capital Allocation
🔄 Strategic Portfolio Simplification
🌍 Expansion of Mega-Yards
🔋 Focus on EV Parts Market
High EV/EBITDA Ratio
Low Net Profit Margin
High Debt Levels
📉 Revenue Decline in North America
⚠️ Market Challenges in Europe
🔒 Uncertain Economic Environment
Overall, LKQ Corporation demonstrates a strong business model characterized by operational excellence and effective capital allocation, though it faces revenue declines in North America and market pressures in Europe. Future prospects look positive with expansion initiatives and a focus on the EV market, despite macroeconomic uncertainties.
Analysis Date: February 20, 2025
Last Updated: March 12, 2025
Past performance does not guarantee future results. The data presented is indicative and may not be updated in real-time.
LKQ Corporation is a company that provides parts and materials for fixing and maintaining vehicles. They sell a wide range of items, including bumpers, lights, and glass for cars, as well as parts for trucks and recreational vehicles. LKQ works with repair shops, car dealerships, and everyday customers, helping them find the right parts when their vehicles need repairs. The company operates in many countries, including the United States and several in Europe.
Streams of revenue
Geographic Distribution
Core Products
Business Type
Business to Business
Competitive Advantages
Key Business Risks
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$84.40
Current Market Price: $41.12
IV/P Ratio: 2.05x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
51.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for LKQ
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (15.63)
P/B ratio ≤ 1.5 (1.78)
Current ratio ≥ 2.0 (1.71x)
Long-term debt < Net current assets (2.61x)
Margin of safety (51.0%)
LKQ does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
11.35%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-30)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
37.96%
Higher values indicate better efficiency in production
TTM (as of 2025-04-30)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
4.78%
Higher values indicate better overall profitability
TTM (as of 2025-04-30)
LKQ has a gross profit margin of 37.96%, indicating effective management of production costs relative to sales, which is a positive indicator of profitability.
A return on equity of 11.18% suggests that the company is efficient in generating profits from shareholder equity, which is a positive sign for investors.
With a net profit margin of only 4.78%, the company's ability to convert sales into actual profit is limited, suggesting potential operational inefficiencies.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.93x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
1.71x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
A current ratio of 1.71 indicates that LKQ has sufficient short-term assets to cover its short-term liabilities, providing a buffer for financial stability.
With an interest coverage ratio of 4.93, the company is generating enough earnings to comfortably pay its interest expenses, indicating strong financial health.
The debt-to-equity ratio of 0.93 and debt-to-assets ratio of 0.38 indicate that the company is relatively leveraged, which can pose a risk in economic downturns.
Meeting Expectations
Higher values indicate better execution and credibility
Recent Results
EPS
LKQ demonstrated a commitment to operational excellence, achieving a stable EBITDA margin in its European segment of 10.1%, the highest Q4 segment EBITDA margin achieved in Europe. This reflects the company's ability to maintain profitability even in challenging market conditions.
The company returned $678 million to shareholders through share repurchases and dividends, demonstrating a strong commitment to capital allocation. The ongoing share buyback program, with $1.7 billion remaining in authorization, indicates confidence in the business's future.
LKQ successfully divested five non-core businesses, focusing on its core competencies. This simplification strategy aims to enhance operational efficiency and improve margins, reflecting a proactive approach to portfolio management.
The North American segment faced an 8.5% daily revenue decline driven by a decrease in collision parts revenue and repairable claims, indicating vulnerability to market fluctuations.
LKQ plans to expand its mega-yards in North America, which will significantly increase capacity and productivity by consolidating smaller yards into larger facilities. This initiative is expected to yield positive long-term returns.
The company is actively exploring the EV market by investing in remanufacturing technologies for batteries and parts, positioning itself to capitalize on the growing transition to electric vehicles.
Despite some markets showing growth, overall organic revenue in Europe was flat, and competitive pricing pressures from smaller players challenge the company's market position.
The company faces ongoing macroeconomic challenges, including fluctuating commodity prices and foreign exchange rates, which could impact margins and overall performance.
