LKQ Corporation (LKQ): A Bull Case Theory 

We came across a bullish thesis on LKQ Corporation on Value & Error’s Substack. In this article, we will summarize the bulls’ thesis on LKQ. LKQ Corporation’s share was trading at $29.18 as of December 2nd. LKQ’s trailing and forward P/E were 10.92 and 8.84 respectively according to Yahoo Finance.

LKQ Corporation (LKQ) is the leading distributor of aftermarket and recycled auto parts in the U.S. and Europe, with a market presence in North America 15 times larger than its nearest competitor and a European distribution network comparable to O’Reilly and AutoZone.

The company benefits from the non-discretionary nature of auto parts demand, and its recycled parts business is countercyclical, providing resilient free cash flow even in economic downturns. LKQ’s scale drives significant purchasing power and enables faster delivery times, further strengthening its competitive moat.

Despite these structural advantages, the company has faced operational challenges following its largest-ever acquisition in 2023, coupled with concerns over tariffs, leading management to repeatedly miss guidance. These factors have contributed to the stock trading at decade-low valuations, currently offering an attractive 12% free cash flow yield and a 6x EBITDA multiple.

The market appears to be mispricing LKQ’s durable cash flow profile, strong competitive positioning, and countercyclical exposure, creating a potential upside opportunity. With the company now stabilizing post-acquisition and benefiting from its dominant scale in both North America and Europe, LKQ is well-positioned to convert operational improvements into cash flow growth, while its defensive business segments provide downside protection.

The combination of low valuation, resilient earnings, and structural market advantages presents a compelling risk/reward scenario for investors seeking both income and capital appreciation. Even with near-term headwinds addressed, LKQ’s entrenched market position and cash-generative operations suggest the stock could experience meaningful rerating as execution improves and investor confidence returns.

Previously we covered a bullish thesis on LKQ Corporation by Stock Analysis Compilation in November 2024, which highlighted the company’s resilience, market share gains, and strong free cash flow. The company’s stock price has depreciated approximately 25.42% since our coverage due to operational headwinds. The thesis still stands as LKQ’s scale and cash-generative operations remain intact. Value & Error shares a similar bullish perspective but emphasizes post-acquisition stabilization and rerating potential.

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Disclosure: None.