Is LKQ (LKQ) Now Offering Value After Prolonged Share Price Weakness?

• If you are wondering whether LKQ's recent share price weakness has left the stock looking mispriced, this breakdown will help you weigh what you are paying against what you are getting.
• The shares recently closed at US$29.75, with returns of a 5.4% decline over 7 days, a 14.0% decline over 30 days, a 0.9% decline year to date and a 25.2% decline over 1 year, alongside a 40.6% decline over 3 years and a 23.2% decline over 5 years.
• Recent coverage around LKQ has focused on its position as a listed auto parts and services provider, including investor discussions about how its business mix might be reacting to changing industry conditions and company specific developments. These talking points give extra context to the share price moves and help frame the question of what a fair price for the stock might be today.
• On our valuation checks, LKQ currently scores 6 out of 6. Next we will look at what different valuation methods suggest about the shares, before finishing with a way to tie all those numbers into a clearer long term story.

Find out why LKQ's -25.2% return over the last year is lagging behind its peers.

Approach 1: LKQ Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business could be worth today by projecting its future cash flows and then discounting those back to a single present value figure.

For LKQ, the DCF uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month Free Cash Flow is about $766.5 million. Analyst and extrapolated estimates point to Free Cash Flow moving to around $977.5 million by 2035, with interim projections such as $802.0 million in 2026 and $842.1 million in 2027, all in US$ terms.

When those projected cash flows are discounted back using this model, LKQ’s estimated intrinsic value comes out at about $61.04 per share. Against the recent share price of $29.75, the model output implies the stock is around 51.3% below that intrinsic value, which flags it as materially undervalued on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests LKQ is undervalued by 51.3%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for LKQ.

Approach 2: LKQ Price vs Earnings

For a profitable company like LKQ, the P/E ratio is a useful yardstick because it tells you how many dollars you are paying today for each dollar of current earnings. It is a quick way to compare what the market is asking you to pay for LKQ’s profits versus other options.

What counts as a “normal” or “fair” P/E depends a lot on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually calls for a lower one.

LKQ currently trades on a P/E of 12.74x. That sits below the Retail Distributors industry average of 14.86x and also below the broader peer group average of 39.01x. Simply Wall St’s Fair Ratio for LKQ is 17.13x, which is its proprietary view of what a reasonable P/E might be once you factor in items like earnings growth, profit margins, industry, market cap and specific risks.

Compared with simple industry or peer comparisons, the Fair Ratio aims to be more tailored because it adjusts for LKQ’s own characteristics rather than treating all companies as alike. On this measure, LKQ’s actual P/E of 12.74x is below the Fair Ratio of 17.13x, which may indicate that the shares are inexpensive on an earnings basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your LKQ Narrative

Earlier we mentioned that there is an even better way to understand valuation, so on Simply Wall St’s Community page you can use Narratives, where you write your own story for LKQ, link it to specific forecasts for revenue, earnings, margins and a fair value, have that fair value continuously compared with the live share price to help you judge when the stock might look attractive or expensive, and see it automatically refresh as new news or earnings arrive. For example, one investor might build a bullish LKQ Narrative with a fair value near US$52.80 based on factors like higher miles driven and new hybrid related parts opportunities. Another might build a more cautious Narrative with a fair value closer to US$40.94 that stresses cost cuts, European challenges and competition.

Do you think there's more to the story for LKQ? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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