LKQ Corporation is a leading provider of alternative and specialty parts to repair and accessorize automobiles and other vehicles. The company was founded in 1998 and is based in Chicago, Illinois.
LKQ Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Lkq Corp with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Lkq Corp ranked in the 74th percentile in terms of potential gain offered. Moreover, under all the scenarios we modelled, the output consistently forecasted positive returns. The most interesting components of our discounted cash flow analysis for Lkq Corp ended up being:
The company has produced more trailing twelve month cash flow than 87.88% of its sector Consumer Cyclical.
Lkq Corp's weighted average cost of capital (WACC) is 6%; for context, that number is higher than merely 5.57% of tickers in our DCF set.
LKQ's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 2%; for context, that number is higher than merely 5.57% of tickers in our DCF set.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
AMWD, LEA, NDLS, THRM, and MHO can be thought of as valuation peers to LKQ, in the sense that they are in the Consumer Cyclical sector and have a similar price forecast based on DCF valuation.
Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of LKQ Corporation and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers.
Moody's Investors Service confirmed the ratings of LKQ Corporation ("LKQ") including the corporate family and Probability of Default ratings at Ba2 and Ba2-PD, respectively; LKQ European Holdings B.V.'s senior unsecured notes at Ba2; and LKQ Italia Bondco S.p.A.'s senior unsecured notes at Ba3. The outlook is stable.
With shares almost recovering from the March broad market sell-off, we still believe there is upside opportunity in LKQ Corporation (LKQ) shares. However, that would depend if the company can execute on their long-term goals of bringing their European operations, which now accounts for the bigger portion of total sales,...