Should You Investigate Motorcar Parts of America, Inc. (NASDAQ:MPAA) At US$19.20?

Motorcar Parts of America, Inc. ( NASDAQ:MPAA ), may not be a large-cap stock, but its share price has risen more than 20% in the past two months on the NASDAQGS. Less closed, small caps present more opportunity for mispricing due to the lack of information available to the public, which is a good thing. So, can a stock trade at a lower price compared to its real value? Today I’ll analyze the latest data on Motorcar Parts America’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Motorcar Parts of America

Are American Motor Car Parts Still Cheap?

According to my price multiple model, when I compare the company’s price-to-earnings ratio to the industry average, the stock is currently expensive. In this instance, I used the price-to-earnings (PE) ratio because there is not enough information to reliably forecast the stock’s cash flows. I find that Motorcar Parts of America’s ratio of 58.37x is higher than its peer average of 20.05x, indicating that the stock is trading at a higher price relative to the auto components industry. If you like a stock, you may want to keep an eye out for a possible price drop in the future. Since the American share of motorcar parts is fairly volatile (meaning its price movements are magnified relative to the rest of the market) this means that the price may go down, giving us another opportunity to buy in the future. This is based on its high beta, which is a good indicator of share price volatility.

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Can we expect growth from America’s motorcar parts?

Earnings-and-Revenue-Growth

Earnings-and-Revenue-Growth

Investors seeking growth in their portfolio may want to consider a company’s prospects before buying its shares. Buying a good company with a solid outlook at a cheap price is always a good investment, so take a look at the company’s future prospects as well. With profits expected to double in the coming days, the future looks very bright for American motorcar parts. More cash flow appears to be in the cards for the stock, which should feed into a higher share valuation.

What does this mean for you?

Are you a shareholder? The market appears to have well and truly priced in the MPAA’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you think MPAA should trade below its current price, buying it back when its price falls towards higher sales and the industry’s PE ratio will be profitable. But before you take this decision, let’s see if its fundamentals have changed.

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Are you a potential investor? If you’ve been keeping tabs on the MPAA for a while, now might be a good time to get into the stock. Pricing has outperformed its industry peers, which means there isn’t much upside from mispricing. However, the positive outlook is encouraging for the MPAA, which means it’s worth diving deeper into other factors to take advantage of the next price drop.

In light of this, if you want to do further analysis on the company, it is essential to be aware of the risks involved. Be aware that American Motor Car Parts is showing 3 warning signs in our investment analysis And 1 of them doesn’t sit well with us…

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If you are no longer interested in American Motorcar Parts, you can use our free platform to view our list of over 50 other stocks with high growth potential.

Have feedback on this article? Concerned about content? To keep in touch Directly with us. Alternatively, email the editorial team (at) simplywallst.com.

This article by Simply Wall Saint is general in nature. We provide commentary based on historical data and analyst forecasts, and our articles are not intended to be financial advice. It does not recommend buying or selling any stock and does not take into account your objectives or your financial situation. We aim to bring you long-term focused analytics powered by fundamental data. Note that our analysis does not account for recent price-sensitive company announcements or qualitative material. Simply Wall St. has no position in any of the stocks mentioned.

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