Motorcar Parts of America (MPAA) surged following its quarterly announcement in November 10; demand for vehicle replacement parts rebounding strongly from Q1, explains Taesik Yoon, growth stock specialist and editor of Forbes Investor.
The automobile is emerging as the transportation mode of choice for activities such as work, shopping, appointments, and family vacations in today’s COVID environment — fiscal 2021 Q2 net sales rose 2.9% year-over-year to a record $154.7 million and came in $6.0 million above the consensus estimate.
And with the company continuing to do an excellent job managing the increased costs arising from the safety and health initiatives necessitated by the pandemic, adjusted earnings climbed by an even larger 10.6% to 73 cents per share. This also set a new all-time high and crushed analysts’ expectations for a 30.3% drop in profits to 46 cents per share.
More importantly, while MPAA still refrained from providing specific guidance at this time, there are several reasons why the company believes it is well positioned for continued and sustainable top and bottom-line growth going forward.
This includes the vast majority of consumers in MPAA’s target market being unable to work from home and reticent to use mass transportation or ride share, which should keep use of personal vehicles for daily activities elevated for the foreseeable future.
In addition, the fact that people generally keep their vehicles longer during recessionary times, bodes well for its aftermarket replacement parts and non-discretionary product offerings in the future.
Additionally, the company is seeing demand for its benchtop testers and electronic testing products and subscription services continuing to rise.
MPAA ended the quarter at $20.9 million of cash even after the company used essentially all of the impressive $19.4 million in free cash flow it produced during the period to further reduce debt by $18.9 million to $116.3 million.
Given these positive trends it’s no wonder that MPAA feels confident enough to start putting some of its cash balance to good use by resuming stock buybacks under its remaining $21.3 million authorization. We believe you should continue to follow the company’s lead.
