Major Moneymaker Belies its Boring Image
Wednesday, November 7th, 2007
By Mitchell Clark, B.Comm. for Profit Confidential
Back in July of last year, I wrote about a great company that operates in the auto parts business. Now, a lot of people don’t get excited about the domestic auto parts business, but this doesn’t mean there aren’t great companies out there making money.
The company I wrote about is called LKQ Corporation (NASDAQ/LKQX). Clearly, a corporate name like this isn’t very inspirational.
LKQ Corporation considers itself to be one of the largest suppliers of recycled original equipment manufacturer (OEM) auto parts and assemblies. The company sells to thousands of collision-repair businesses, service shops and vehicle dealerships throughout the United States. It has 50 locations with state-of-the-art vehicle procurement, dismantling, inventory, sales and distribution services.
You might be surprised at just how successful this company is. You might think that the auto parts industry is a mature one with little growth potential. This might be the case for the industry, but not for LKQ.
In its latest third quarter, the company’s revenues grew 23% to over two-hundred and forty-three million dollars, up solidly from revenues of almost one-hundred ninety-eight million dollars generated in the third quarter of 2006. Organic revenue growth for the third quarter was about 16%.
Net income grew a whopping 39% to almost fifteen million dollars, up substantially from net income of ten-and-a-half million dollars generated in the third quarter of 2006.
Last July, LKQ was trading around $20.00 per share and was quite unappreciated by the stock market. Now, the stock recently hit a new record high of just over $41.00 per share, and the company plans another two-for-one stock split in early December.
A great success story like LKQ serves to illustrate that, even in mature industries, you can find great businesses that are worthy of speculation. It doesn’t matter that LKQ is kind of boring and under-followed by the investment community. This company has proven itself to be a major wealth creator for stockholders over the last year. Sometimes, the best moneymakers really are the boring, old-tech type of companies.
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
