LKQ Corporation (LKQ): A Bull Case Theory

We came across a bullish thesis on LKQ Corporation (LKQ) on Ozeco’s Substack. In this article, we will summarize the bulls’ thesis on LKQ. LKQ Corporation (LKQ)’s share was trading at $38.12  as of 13^th June. LKQ’s trailing and forward P/E were 14.17 and 10.83 respectively according to Yahoo Finance.

LKQ Corporation (LKQ) stands as a dominant force in the global auto parts ecosystem, leading in every category it operates in—from aftermarket collision parts, salvage, remanufacturing, and car body paint in North America to technical parts distribution across Europe. Over the past five years, the company has expanded North American margins by 500 basis points and is now applying the same operational efficiency playbook to its European business.

Its core model is inherently defensive; car repairs following accidents are non-discretionary, and insurance companies overwhelmingly opt for the lowest-cost quality parts—an area where LKQ excels. The market opportunity is vast, with approximately 600 million vehicles across North America and Europe requiring regular maintenance and repair.

LKQ is intensifying efforts to drive organic growth, optimize its portfolio, and capitalize on the fragmented European market through continued consolidation. Despite this strength, the stock trades at a discounted valuation—10–11x P/E versus its historical 14–15x range—due to recent operational disappointments, creating a timely entry point as performance improves and macro conditions increasingly favor defensive investments.

The company is also expected to consider divestitures of non-core assets, further streamlining operations. With a threefold increase in free cash flow over four years and a sharp focus on shareholder returns, LKQ is well-positioned to become a long-term compounder. Its capital-light model and consistent mid-single-digit profit growth enable aggressive buybacks, driving outsized EPS growth.

Moreover, LKQ provides a rare double hedge against tariffs, reinforcing its appeal as a resilient, high-quality holding over a multi-year horizon.

Previously, we covered a bullish thesis on LKQ Corporation by Stock Analysis Compilation framed as a value play poised to rebound from industry headwinds with strong free cash flow, market share gains, and shareholder returns. The second thesis strengthens the case by emphasizing LKQ’s category dominance, margin expansion, and strategic positioning across North America and Europe. It highlights the company’s capital-light, defensive business model, pricing power with insurers, and ongoing consolidation opportunities in fragmented markets. Together, the theses present LKQ as both a mispriced cyclical recovery story and a long-term compounder, offering downside protection with credible upside from operational leverage and disciplined capital allocation.

LKQ Corporation (LKQ) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held LKQ Corporation (LKQ) at the end of the first quarter which was 40 in the previous quarter. While we acknowledge the risk and potential of LKQ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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