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Should Value Investors Pick LKQ Corporation (LKQ) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put LKQ Corporation (LKQ - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, LKQ Corporation has a trailing twelve months PE ratio of 11.29, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 17.52. If we focus on the stock’s long-term PE trend, the current level puts LKQ Corporation’s current PE ratio somewhat below its midpoint (which is 19.42) over the past five years.
However, the stock’s PE compares unfavorably with the Zacks Auto-Tires- Trucks sector’s trailing twelve months PE ratio, which stands at 9.95. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Nonetheless, we should also point out that LKQ Corporation has a forward PE ratio (price relative to this year’s earnings) of just 10.92, so it is fair to say that a slightly more value-oriented path may be ahead for LKQ Corporation’s stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, LKQ Corporation has a P/S ratio of about 0.64. This is noticeably lower than the S&P 500 average, which comes in at 3.09 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, LKQ Corporation currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes LKQ a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for LKQ Corporation is just 0.84, a level that is slightly lower than the industry average of 1.63. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 7.96, which is somewhat better than the industry average of 12.45. Clearly, LKQ is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though LKQ Corporation might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of D. This gives LKQ a VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been disappointing. The current quarter has seen eight estimates go lower in the past sixty days compared to none higher, while the full year estimate has seen nine downward and no upward revisions in the same time period.
This has had a noticeable impact on the consensus estimate, as the current quarter consensus estimate has fallen 6.5% in the past two months, while the full year estimate has declined 2.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
LKQ Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 24% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and industry trend to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Should Value Investors Pick LKQ Corporation (LKQ) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put LKQ Corporation (LKQ - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, LKQ Corporation has a trailing twelve months PE ratio of 11.29, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 17.52. If we focus on the stock’s long-term PE trend, the current level puts LKQ Corporation’s current PE ratio somewhat below its midpoint (which is 19.42) over the past five years.
However, the stock’s PE compares unfavorably with the Zacks Auto-Tires- Trucks sector’s trailing twelve months PE ratio, which stands at 9.95. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Nonetheless, we should also point out that LKQ Corporation has a forward PE ratio (price relative to this year’s earnings) of just 10.92, so it is fair to say that a slightly more value-oriented path may be ahead for LKQ Corporation’s stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, LKQ Corporation has a P/S ratio of about 0.64. This is noticeably lower than the S&P 500 average, which comes in at 3.09 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, LKQ Corporation currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes LKQ a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for LKQ Corporation is just 0.84, a level that is slightly lower than the industry average of 1.63. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 7.96, which is somewhat better than the industry average of 12.45. Clearly, LKQ is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though LKQ Corporation might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of D. This gives LKQ a VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been disappointing. The current quarter has seen eight estimates go lower in the past sixty days compared to none higher, while the full year estimate has seen nine downward and no upward revisions in the same time period.
This has had a noticeable impact on the consensus estimate, as the current quarter consensus estimate has fallen 6.5% in the past two months, while the full year estimate has declined 2.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
LKQ Corporation Price and Consensus
LKQ Corporation price-consensus-chart | LKQ Corporation Quote
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
LKQ Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 24% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates, analyst sentiment and industry trend to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>