According to the Wall Street Journal, Japanese auto parts suppliers are having a hard time getting product out the door due to the earthquake and tsunami. North American car manufacturers will soon face parts shortages that could affect production here. If there are slowdowns, parts suppliers on this side of the Pacific could feel the pain. One company that won't suffer a slowdown is Pennsylvania-based automotive replacement parts supplier, Dorman Products (Nasdaq:DORM). Its business has never been better and even though its stock is trading near an all-time high, I believe this is just the beginning of a move much higher.

TUTORIAL: Introduction To Fundamental Analysis

Latest Financial Results
Its fourth quarter and year-end results were outstanding. Revenue grew 27% in Q4 to $122.5 million while full-year sales were up 20.8% to $455.7 million. Moving down the income statement, gross and operating margins during the fourth quarter improved 80 and 260 basis points respectively. For the entire year, they improved 300 and 580 basis points. In terms of the bottom line, its fourth quarter earnings per share grew 56% to 67 cents, while full-year earnings jumped 73% to $2.55. CEO Steven Berman attributes its success in 2010 to a record number of new product introductions and sees more of the same in 2011. Analysts' EPS estimate for 2011 is $2.89 and $3.25 in 2012.

Past Financial Results
Dorman's financial performance in the past decade has been a model of consistency and stable growth. Its revenues have increased in nine consecutive years while net income has risen in six of those years. It's a commendable track record, especially when you consider the economic situation the last three years. Very few companies of any size can make this claim and it's for this reason its stock sits just 18.5% off the five-year high of $49.32, which also happens to be an all-time high.

Dorman Products and Peers

Company EV/EBITDA
Dorman Products (Nasdaq:DORM) 7.7
Superior Industries International (NYSE:SUP) 4.7
Modine Manufacturing (NYSE:MOD) 7.5
American Axle & Manufacturing (NYSE:AXL) 5.0
Titan International (NYSE:TWI) 14.1

Strong Management
Given Dorman's 2009 letter to shareholders, some wonder if the year's strong results were lucky given relatively flat profits the previous five years. It's a fair question. However, the reality is that only two of those years, 2006 and 2008, were disappointments and even then profits were more than satisfactory. It's a testament to the company's passion for excellence; a philosophy developed by the Berman brothers, founders of a small automotive parts distribution business in 1978 that they built it into an extremely successful company. Sadly, Richard Berman died prematurely in January from illness and his brother Steven took over the reins. I suspect very little will change in the future and that's a good thing.

Bottom Line
Dorman Products went public in 1991. In the 20 years since, the Nasdaq cumulatively outperformed its stock until early in 2010 when it finally pulled ahead. It's for this reason; combined with everything I've said previously, that leads me to believe this is only the beginning of an extended run to new highs. (Find out what to consider before taking a ride with stocks from this industry. Check out Analyzing Auto Stocks.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  10. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!