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Shares of Motorcar Parts of America (MPAA, Financials) surged 13% to $6.50 as of 3:16 p.m. ET Monday after the company reported record third-quarter sales, improved profitability, and a strengthened balance sheet as it capitalized on the growing demand for aftermarket automotive components.
Driven by growth in its rotating electrical and brake-related product divisions, the business achieved net sales of $186.2 million, an 8.3% rise year over year. With gross margin rising to 24.1%, from 17.5% a year earlier, gross profit climbed 49.4% to $44.9 million.Working capital savings let motorcar parts produce $34.4 million in operational cash flow. During the quarter the business repurchased 268,130 shares for around $2.1 million and reduced net debt by 26% to $84 million.Reflecting $5 million in non-cash costs, adjusted profits per share came in at $0.11; net income, a reversal from a $47.2 million net loss in the same period the previous year, came in at $2.3 million. With a pre-adjusted EBITDA of $27 million, the company's margin improvement efforts are very noteworthy.Calipers, pads, and rotors are among the brake-related goods that became popular and demand is likely to grow in the spring maintenance season. Management also emphasized the advantages of an aging U.S. car fleet, which now averages 12.8 years, therefore sustaining ongoing demand for non-discretionary aftermarket components.Supported by worldwide development, Motorcar Parts hopes to achieve $100 million in sales from diagnostic equipment in the next three years. By paying Mexican operations locally rather than depending on peso forward contracts, the business is also streamlining its supply chain. While tariff levies are being used to reduce trade-related risk, interest rate developments should help profitability.
This article first appeared on GuruFocus.