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Does LKQ Corporation's (NASDAQ:LKQ) 12% Earnings Growth Make It An Outperformer?

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Simply Wall St
·3 min read
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Today I will examine LKQ Corporation's (NasdaqGS:LKQ) latest earnings update (31 December 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of LKQ's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.

View our latest analysis for LKQ

Did LKQ beat its long-term earnings growth trend and its industry?

LKQ's trailing twelve-month earnings (from 31 December 2019) of US$541m has jumped 12% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.0%, indicating the rate at which LKQ is growing has accelerated. What's the driver of this growth? Well, let’s take a look at whether it is only owing to an industry uplift, or if LKQ has experienced some company-specific growth.

NasdaqGS:LKQ Income Statement, March 16th 2020
NasdaqGS:LKQ Income Statement, March 16th 2020

In terms of returns from investment, LKQ has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 5.3% is below the US Retail Distributors industry of 6.8%, indicating LKQ's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for LKQ’s debt level, has declined over the past 3 years from 11% to 9.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 68% to 79% over the past 5 years.

What does this mean?

Though LKQ's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as LKQ gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research LKQ to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for LKQ’s future growth? Take a look at our free research report of analyst consensus for LKQ’s outlook.

  2. Financial Health: Are LKQ’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.