The share price of Motorcar Parts of America Inc. has been getting knocked around over the last month, starting with a nearly 14% drop after reporting its first-quarter earnings last month.
The stock price in the Torrance manufacturer and distributor of replacement parts for heavy-duty trucks and industrial, marine and agricultural vehicles and machinery fell to a close of $7.87 on Aug. 9 after reporting a wider net loss in its earnings report from the closing price the day before of $9.14.
The share price closed at $7.62 on Sept. 7.
The company reported on Aug. 9 a net loss of $1.4 million (-7 cents a share) for the fiscal first quarter ending June. 30, way up from the net loss of $175,000 (1 cent) in the same period of the previous year.
Revenue decreased nearly 2.5% from the first quarter of the prior year to about $160 million.
But at least one institutional investor in Motorcar was upbeat about the company’s prospects.
In a letter to its investors from late July, the chief principals of Immersion Investments LLC in Needham, Massachusetts, said that now is a good time to buy shares in Motorcar Parts.
David Polansky and Tim Delaney wrote in the letter that the stock opened the year at $11 a share, went down to $4.50 a share by May and was at the time of the letter hovering in the $9 range, but still well off its $20 a share historic range.
“Of course, price per share is usually a meaningless metric but since we know the business hasn’t gotten materially worse in the past 10 years, earnings are inflecting upwards, and a significant catalyst for the stock’s initial decline was due to non-economic reasons, we think it’s ($20 a share) a reasonable target,” Delaney and Polansky said in the letter.
The last time the share price flirted with a closing price of $20 a share was Nov. 8 when the company’s share price closed at a 52-week high of $19.84. The price last consistently closed at $20 a share or higher in January through August of 2021.
“Tim and I have developed a unique process of identifying small under-the-radar public companies that have the potential for excellent long-term returns. Our process measures potential investments on four key criteria – management quality, business quality, financial strength, and valuation,” Polansky said in a statement at the time the firm was launched in June 2021. “Our evaluation of risk is company specific. We are more concerned with potential adverse long-term outcomes to the business than near-term stock price movements.”
Motorcar Chief Executive Selwyn Joffe was also upbeat about the company’s financials and its future prospects.
In a conference call to discuss first quarter results, Joffe said that the company was supported by a strong demand for replacement parts as people keep their vehicles longer.
Equally relevant, he added, was the miles-driven growth rate of 2.3% for the first six months of the year.
Industry observers expect that it will surpass the pre-pandemic growth rate of 1.6% reached in the three-year period from 2017 to 2019, Joffe continued.
“In short, we have a built-in solid platform for growth, and our nondiscretionary aftermarket products have a critical need for customers and consumers,” Joffe said during the call.
