- Wondering whether LKQ at US$28.19 now reflects good value or continuing risk? This article walks through the key signals that can help you judge the stock for yourself.
- Over the past year, LKQ has recorded a 30.7% loss, including a 12.5% decline over the last 30 days and a 4.9% pullback in the most recent week. Moves like these often prompt investors to reassess both downside risk and recovery potential.
- Recent coverage around LKQ has focused on its position in the Retail Distributors space and how investors are reacting to changing expectations for the business and sector. This broader context helps explain why the share price has been under pressure and why valuation is back in focus.
- Even after that weak share price performance, LKQ currently scores a 6 out of 6 valuation check score. The rest of this article will compare what different methods say about fair value and then finish with a more complete way to think about valuation overall.
Find out why LKQ's -30.7% return over the last year is lagging behind its peers.
Approach 1: LKQ Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a business could be worth by projecting its future cash flows and discounting them back to today, using the idea that a dollar received in the future is worth less than a dollar received now.
For LKQ, the 2 Stage Free Cash Flow to Equity model starts with last twelve months free cash flow of about $766.5 million. Analyst estimates and subsequent extrapolations by Simply Wall St then project free cash flow out over the next decade, including a forecast of $842.0 million in 2029. All of these projected cash flows, expressed in dollars, are discounted back to today and combined with a terminal value to arrive at an estimated intrinsic value per share.
On this basis, the DCF model suggests an intrinsic value of about $59.59 per share. Compared with the current share price of $28.19, the model implies the stock is 52.7% undervalued according to these cash flow assumptions.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests LKQ is undervalued by 52.7%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: LKQ Price vs Earnings
P/E is often the go to multiple for profitable companies because it links what you pay directly to the earnings the business is already generating. It also captures what the market is willing to pay for each dollar of profit, which tends to move with expectations and perceived risk.
In general, higher growth potential and lower perceived risk can justify a higher P/E, while slower growth or higher uncertainty can leave a stock trading on a lower P/E. That is why it helps to compare LKQ with both its own sector and a wider peer group.
LKQ currently trades on a P/E of 12.1x, compared with the Retail Distributors industry average of about 15.2x and a broader peer average of 34.7x. Simply Wall St also calculates a proprietary Fair Ratio of 16.6x, which is the P/E level suggested by factors such as LKQ’s earnings profile, industry, margins, market cap and risk characteristics.
This Fair Ratio is more tailored than a simple industry or peer comparison because it adjusts for company specific traits rather than assuming all firms deserve the same multiple. With LKQ’s actual P/E of 12.1x sitting below the Fair Ratio of 16.6x, this approach indicates that the shares may be trading at a lower valuation relative to their earnings.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your LKQ Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives let you spell out your story for LKQ, link that story to specific assumptions for future revenue, earnings and margins, turn those assumptions into a fair value, and then compare that fair value to the current price, all within Simply Wall St’s Community page. Different investors might, for example, build a bullish LKQ Narrative around growing miles driven, higher collision repair volumes and new hybrid related parts opportunities. A more cautious Narrative might focus on ADAS reducing accidents, execution risk in the 1 LKQ Europe program and supply chain bottlenecks. Each Narrative updates automatically as fresh news or earnings arrive, so you can quickly see whether your story still matches the numbers and decide how you want to act.
Do you think there's more to the story for LKQ? Head over to our Community to see what others are saying!
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.
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