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Should Value Investors Buy LKQ (LKQ) Stock?

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Zacks Equity Research
·3 min read
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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is LKQ (LKQ). LKQ is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 12.82, which compares to its industry's average of 15.71. Over the last 12 months, LKQ's Forward P/E has been as high as 16.46 and as low as 5.50, with a median of 13.51.

Investors should also note that LKQ holds a PEG ratio of 1.01. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LKQ's industry has an average PEG of 1.03 right now. Within the past year, LKQ's PEG has been as high as 1.09 and as low as 0.37, with a median of 0.92.

We should also highlight that LKQ has a P/B ratio of 1.83. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 2.23. Over the past year, LKQ's P/B has been as high as 2.28 and as low as 0.84, with a median of 1.83.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. LKQ has a P/S ratio of 0.82. This compares to its industry's average P/S of 1.

Finally, investors should note that LKQ has a P/CF ratio of 10.91. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. LKQ's P/CF compares to its industry's average P/CF of 12.18. Within the past 12 months, LKQ's P/CF has been as high as 14.28 and as low as 4.99, with a median of 10.83.

These are just a handful of the figures considered in LKQ's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that LKQ is an impressive value stock right now.


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Zacks Investment Research