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Motorcar Parts Steady But Solid
Not known to many outside the auto parts retailing space, Motorcar Parts of America (Nasdaq:MPAA) is a remanufacturer of alternators and starters utilized in imported and domestic passenger vehicles, light trucks and heavy duty applications. Its products are sold to automotive retail outlets and the professional repair market throughout the United States and Canada, with remanufacturing facilities located in California, Mexico and Malaysia. It's a specialty auto parts manufacturer that has a solid niche in a quality industry.
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A Boring Quarter
Net income for the fiscal 2011 second quarter increased to $3.5 million, or 29 cents per diluted share, versus net income of $3.4 million, or 28 cents per diluted share, for the year-ago comparable period. However, in the 2009 comparable quarter, net income included a $1.3 million, or 7 cents per diluted share, gain related to the company's acquisition of certain assets of Reliance Automotive. So on an apples-to-apples comparison of both quarters, EPS increased to 29 cents from 21 cents, an near 50% advance for this marker of boring alternators and starters.
Net sales for the fiscal 2011 second quarter increased to $41.0 million from $39.4 million for the same period last year. Gross profit for the fiscal 2011 second quarter was $12.7 million, compared with $10.8 million for the same period a year ago. Gross profit margin the fiscal 2011 second quarter was 30.9%, compared with 27.4% in the same quarter a year ago.
Boring is Good
Shares in Motorcar Parts have been on tear in 2010, up 125% year to date. With a market cap of $137 million, share still trade at under 13-times earnings. The company seems to benefiting from the strong tailwinds that have pushed auto part retailers shares significantly higher in 2010. New car sales have not been as strong in 2010, as many had predicted, so that suggests that cars are getting older. Older cars translates into a greater demand for auto parts. The leading retailers in the space, AutoZone (NYSE:AZO), Advance Auto (NYSE: AAP) and O'Reilly (Nasdaq:ORLY) have all outperformed the market by a significant margin. Year-to-date shares are up 53%, 52% and 62%, respectively. (For related reading, check out Advance Auto Parts Continues To Prosper.)
There is legitimate concern that 2011 will not be as favorable to auto parts retailers as 2011. Of course, that would have an effect on manufacturers like Motorcar Parts, who will experience a more pronounced affect than the actual retailers. Yet shares in MPAA still remain attractively valued, even though it's not completely accurate to value a manufacturer of auto parts in line with a retailer of such parts.
The Bottom Line
A continued slow economic growth scenario could continue to provide a favorable tailwind to a business like Motorcar Parts. With a decent valuation, despite a run up in share price, this small cap may be one to keep on your radar. (For more, see Analyzing Auto Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 9 Simple Investing Ratios You Need To Know
A Boring Quarter
Net income for the fiscal 2011 second quarter increased to $3.5 million, or 29 cents per diluted share, versus net income of $3.4 million, or 28 cents per diluted share, for the year-ago comparable period. However, in the 2009 comparable quarter, net income included a $1.3 million, or 7 cents per diluted share, gain related to the company's acquisition of certain assets of Reliance Automotive. So on an apples-to-apples comparison of both quarters, EPS increased to 29 cents from 21 cents, an near 50% advance for this marker of boring alternators and starters.
Net sales for the fiscal 2011 second quarter increased to $41.0 million from $39.4 million for the same period last year. Gross profit for the fiscal 2011 second quarter was $12.7 million, compared with $10.8 million for the same period a year ago. Gross profit margin the fiscal 2011 second quarter was 30.9%, compared with 27.4% in the same quarter a year ago.
Shares in Motorcar Parts have been on tear in 2010, up 125% year to date. With a market cap of $137 million, share still trade at under 13-times earnings. The company seems to benefiting from the strong tailwinds that have pushed auto part retailers shares significantly higher in 2010. New car sales have not been as strong in 2010, as many had predicted, so that suggests that cars are getting older. Older cars translates into a greater demand for auto parts. The leading retailers in the space, AutoZone (NYSE:AZO), Advance Auto (NYSE: AAP) and O'Reilly (Nasdaq:ORLY) have all outperformed the market by a significant margin. Year-to-date shares are up 53%, 52% and 62%, respectively. (For related reading, check out Advance Auto Parts Continues To Prosper.)
There is legitimate concern that 2011 will not be as favorable to auto parts retailers as 2011. Of course, that would have an effect on manufacturers like Motorcar Parts, who will experience a more pronounced affect than the actual retailers. Yet shares in MPAA still remain attractively valued, even though it's not completely accurate to value a manufacturer of auto parts in line with a retailer of such parts.
The Bottom Line
A continued slow economic growth scenario could continue to provide a favorable tailwind to a business like Motorcar Parts. With a decent valuation, despite a run up in share price, this small cap may be one to keep on your radar. (For more, see Analyzing Auto Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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