We came across a bullish thesis on LKQ Corporation on Show me the incentives…’s Substack. In this article, we will summarize the bulls’ thesis on LKQ. LKQ Corporation’s share was trading at $33.29 as of February 23rd. LKQ’s trailing and forward P/E were 11.43 and 9.33 respectively according to Yahoo Finance.
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LKQ Corporation is a global distributor of aftermarket vehicle parts and diagnostic services that has historically grown through acquisitions to become the leading player across North America, Europe, specialty, and self-service segments. Trading at roughly 0.85x sales and ~7.5x EBITDA, the company generates strong free cash flow and operates in a largely non-discretionary repair ecosystem driven by insurance-funded claims, where “like kind and quality” replacement parts provide cost savings versus OEM components.
However, recent performance has been pressured by a sharp decline in repairable claims, rising insurance premiums, falling used car prices, mild weather, and tariff concerns, alongside investor frustration over capital allocation following the $2.1 billion Uni-Select acquisition. These factors, combined with long-term fears around autonomous driving, contributed to valuation compression despite LKQ’s scale advantages and strong market positioning.
Activist investors have re-emerged as a central catalyst, with Ancora Advisors gaining board representation and Ananym Capital publicly pushing for portfolio simplification, divestitures, and shareholder returns. Management has already begun executing, divesting non-core European assets, selling the self-service segment for $410 million to reduce leverage, and launching a process to sell the specialty business, potentially worth up to $1 billion.
The situation escalated further when the company announced a formal strategic review to maximize shareholder value, explicitly putting a full sale on the table. Potential outcomes include divesting Europe and Specialty to fund aggressive buybacks and rerate the North American core, or a complete acquisition by private equity or strategic buyers attracted to LKQ’s normalized earnings power and cash generation.
Even without a full transaction, weak comparisons heading into 2026 and stabilizing industry conditions could drive improved results, while activists increase the likelihood that capital will be allocated in shareholder-friendly ways. Overall, the opportunity lies in the disconnect between depressed near-term fundamentals and the company’s historically proven earnings capacity, creating a favorable risk-reward profile with multiple catalysts for value realization.
