Motorcar Parts of America (MPAA) earnings release review for the 4th quarter of their 2021 fiscal year
Category: Motorcar Parts of America (MPAA)
Date: 15 June 2021 Stock Price of Motorcar Parts of America: $24.16 Market Capital of Motorcar Parts: $460.4 million We take a look at the 4th quarter earnings release of their 2021 fiscal year of Motorcar Parts of America (MPAA) a remanufacturer, manufacturer, and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearings and hub assemblies, brake calipers, brake master cylinders, brake power boosters, turbochargers. For the quarter the group reported net sales of $168.1 million and net income of $835 thousand.
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Despite the significant impact of the COVID-19 global pandemic, we achieved record sales and strong profitability for the fourth quarter and for fiscal 2021. - Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America."
About Motorcar Parts of America
Motorcar Parts of America, Inc. is a remanufacturer, manufacturer, and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearings and hub assemblies, brake calipers, brake master cylinders, brake power boosters, turbochargers, and diagnostic testing equipment utilized in imported and domestic passenger vehicles, light trucks, and heavy-duty applications. Its products are sold to automotive retail outlets and the professional repair market throughout the United States, Canada, and Mexico, with facilities located in California, New York, Mexico, Malaysia, China and India, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia, and Canada. In addition, the company’s electrical vehicle subsidiary designs and manufactures testing solutions for performance, endurance, and production of multiple components in the electric power train – providing simulation, emulation, and production applications for the electrification of both automotive and aerospace industries, including electric vehicle charging systems
Overview of Motorcar Parts of America 4th quarter 2021 earnings
Fiscal 2021 Fourth Quarter Results
Results for the fiscal fourth quarter were impacted by COVID-19 expenses related to safety, health initiatives and incrementally higher freight costs, reflecting approximately $2.8 million on a pre-tax basis, or $0.11 per share on a tax-effected basis, for cost of goods sold and operating expenses. Approximately $603,000 of the $2.8 million was due to incremental bonuses and wages paid to the company’s dedicated operating employees on the front line. The balance reflects costs for personal protection equipment (PPE), social distancing initiatives and higher freight costs.
Net cash used in operating activities was $16.4 million for the fiscal 2021 fourth quarter and net debt was $88.9 million at March 31, 2021 compared with $67.6 million at December 31, 2020, reflecting working capital requirements to support the record sales and inventory increases for anticipated business growth in fiscal 2022.
Gross profit for the fiscal 2021 fourth quarter was $32.1 million compared with $36.6 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2021 fourth quarter was 19.1 percent compared with 24.3 percent a year earlier. Gross margin was primarily impacted by brake caliper start-up costs and other product relocation expenses related to the expansion in Mexico, both of which are now nearing completion; higher costs related to COVID-19; and other items, including non-cash and non-economic expenses totaling 6.4 percent
- Net sales for the fiscal 2021 fourth quarter increased 11.5 percent to a record $168.1 million from $150.7 million, which was a record a year ago.
- Net income for the fiscal 2021 fourth quarter was $835,000, or $0.04 per diluted share, compared with a net loss of $8.2 million, or $0.43 per share, a year ago
Results for the fiscal fourth quarter were impacted by COVID-19 expenses related to safety, health initiatives and incrementally higher freight costs, reflecting approximately $2.8 million on a pre-tax basis, or $0.11 per share on a tax-effected basis, for cost of goods sold and operating expenses. Approximately $603,000 of the $2.8 million was due to incremental bonuses and wages paid to the company’s dedicated operating employees on the front line. The balance reflects costs for personal protection equipment (PPE), social distancing initiatives and higher freight costs.
Net cash used in operating activities was $16.4 million for the fiscal 2021 fourth quarter and net debt was $88.9 million at March 31, 2021 compared with $67.6 million at December 31, 2020, reflecting working capital requirements to support the record sales and inventory increases for anticipated business growth in fiscal 2022.
Gross profit for the fiscal 2021 fourth quarter was $32.1 million compared with $36.6 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2021 fourth quarter was 19.1 percent compared with 24.3 percent a year earlier. Gross margin was primarily impacted by brake caliper start-up costs and other product relocation expenses related to the expansion in Mexico, both of which are now nearing completion; higher costs related to COVID-19; and other items, including non-cash and non-economic expenses totaling 6.4 percent
Motorcar Parts America'smanagement commentary on their 4th quarter 2021 earnings
“Despite the significant impact of the COVID-19 global pandemic, we achieved record sales and strong profitability for the fourth quarter and for fiscal 2021. The company is well-positioned across multiple non-discretionary product lines and we remain focused on leveraging our strength as consumer demand for automotive aftermarket parts continues to gain momentum. This is supported by vaccination availability, a return to more normal patterns in our daily lives and strong demand for used vehicles,” said Selwyn Joffe, chairman, president and chief executive officer of Motorcar Parts of America.
“In addition, as the electric vehicle market evolves, we anticipate increasing demand for the technology offered by our wholly owned D&V subsidiary – benefitting from our ability to support the development of the electric vehicle, including battery power emulation, and the testing and development of inverters, electric motors, and high-speed battery-charging station applications,” Joffe added.
“In addition, as the electric vehicle market evolves, we anticipate increasing demand for the technology offered by our wholly owned D&V subsidiary – benefitting from our ability to support the development of the electric vehicle, including battery power emulation, and the testing and development of inverters, electric motors, and high-speed battery-charging station applications,” Joffe added.
FISCAL 2022 OUTLOOK
“Given the ongoing global pandemic and near-term related considerations, the company believes it is still not prudent at this time to provide specific annual sales and gross margin guidance. We will reevaluate this policy as fiscal 2022 evolves. However, we are encouraged by continued strong customer demand for our aftermarket parts.
“As I stated since the beginning of the global pandemic, our industry and our company are resilient and we are continuing to execute our strategic plans for growth and profitability. We are guardedly optimistic about the near and long-term opportunities as an essential supplier in the $125 billion hard parts industry and an evolving provider to the fast-growing electric vehicle and aerospace markets,” Joffe said.
“Given the ongoing global pandemic and near-term related considerations, the company believes it is still not prudent at this time to provide specific annual sales and gross margin guidance. We will reevaluate this policy as fiscal 2022 evolves. However, we are encouraged by continued strong customer demand for our aftermarket parts.
“As I stated since the beginning of the global pandemic, our industry and our company are resilient and we are continuing to execute our strategic plans for growth and profitability. We are guardedly optimistic about the near and long-term opportunities as an essential supplier in the $125 billion hard parts industry and an evolving provider to the fast-growing electric vehicle and aerospace markets,” Joffe said.
Motorcar Parts of America stock price chart over the last 5 years
The image below shows the stock price history of Motorcar Parts of America (MPAA) over the last 5 years. And it's not been a good time for Motorcar Parts of America (MPAA) stockholders. Over the last 5 years the stock of Thor returned -11.9%.
Motorcar Parts of America is also trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Motorcar Parts of America stock is very positive
Motorcar Parts of America is also trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Motorcar Parts of America stock is very positive
Motorcar Parts (MPAA) vs O'reilly (ORLY) over the last 5 years
The image below shows the stock price performance of Motorcar Parts (MPAA) vs O'reilly (ORLY) over the last 5 years. While both are active in the sales of car parts the stock price returns provided by these two compars are very different. The summary below shows the stock price returns provided by both these firms over the last 5 years
The stock of O'reilly has easily outperformed that of Motorcar Parts of America over the last 5 years.
- O'reilly's: 91.6%
- Motorcar Parts of America: -11.9%
The stock of O'reilly has easily outperformed that of Motorcar Parts of America over the last 5 years.
Motorcar Parts of America (MPAA) latest stock valuation
So what is Motorcar Parts America stock worth based on the release of their latest earnings report and the outlook provided. Based on the earnings reported our valuation models provide a target price (full value price) for Motorcar Parts America at $31.60 a stock
We therefore believe that Motorcar Parts America stock is undervalued at its current price around $24.16
We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price), which in this case is $31.60 in this case. A good entry into the stock of Motorcar Parts would therefore be at $28.50 or below.
We expect that stock of Motorcar Parts to kick up strongly from current levels to levels closer to our target price (full value price) in coming weeks and months. As the stock of Motorcar Parts America is trading at well below our suggested entry point we rate the stock of Thor as a buy
We therefore believe that Motorcar Parts America stock is undervalued at its current price around $24.16
We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price), which in this case is $31.60 in this case. A good entry into the stock of Motorcar Parts would therefore be at $28.50 or below.
We expect that stock of Motorcar Parts to kick up strongly from current levels to levels closer to our target price (full value price) in coming weeks and months. As the stock of Motorcar Parts America is trading at well below our suggested entry point we rate the stock of Thor as a buy
Next earnings release of Motorcar Parts of America (MPAA)
It is expected that Motorcar Parts of America will release their 1st quarter 2022 earnings report in late September 2021