Report
Valens Research

LKQ - Embedded Expectations Analysis - 2020 11 02

LKQ Corporation (LKQ:USA) currently trades below corporate averages relative to UAFRS based (Uniform) earnings, with a 15.1x Uniform P/E. At these levels, the market has bearish expectations for the firm. Meanwhile, management may be concerned about their liquidity, cost reduction programs, and the adequacy of supply levels

Specifically, management may lack confidence in their ability to sustain their cost benefits, maintain service levels with less inventory, and preserve their liquidity position. Moreover, they may have concerns about the inadequate supply levels in their businesses and the impact of rising coronavirus cases on their business plans, and they may have concerns about the continued impact of car inspection delays. Management may also lack confidence in their ability to improve their financial performance, continue generating cash flow, and return to their 2021 revenue levels in the North American and European segments. Finally, they may be exaggerating the benefits of their cost reduction programs, and they may lack confidence in their ability to synchronize their plans with rapidly changing market conditions
Underlying
LKQ Corporation

LKQ is a holding company. Through its subsidiaries, the company provides alternative vehicle collision replacement products and alternative vehicle mechanical replacement products. The company is also a provider of alternative vehicle replacement and maintenance products in the United Kingdom, Germany, the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Poland, Slovakia, Austria, and other European countries. In addition to its wholesale operations, the company operates self service retail facilities across the United States that sell recycled automotive products from end-of-life-vehicles. The company is also a distributor of specialty vehicle aftermarket equipment and accessories.

Provider
Valens Research
Valens Research

In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:

  • GAAP and IFRS have failed to provide rules for reliable financial statement reporting
  • Stock analyst recommendations are not grounded in disciplined financial analysis
  • Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
  • Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available

We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.

  • Corporate credit ratings remain years behind the fundamental underpinnings of company performance
  • Stock analysts continue to make recommendations with deeply inherent biases
  • Research firms have failed to break down the walls between credit, equity, and macroeconomic research
  • The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming

The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.

Analysts
Valens Research

Other Reports on these Companies
Other Reports from Valens Research

ResearchPool Subscriptions

Get the most out of your insights

Get in touch