Can Dorman Products Inc. (DORM) Capitalize on the Automotive Aftermarket Boom? Dorman Products’ (DORM) growth trajectory appears optimistic, driven by its expanding portfolio of aftermarket components. With a concurrent boom in the automotive aftermarket industry, do DORM’s fundamentals position it well...
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Dorman Products’ (DORM) growth trajectory appears optimistic, driven by its expanding portfolio of aftermarket components. With a concurrent boom in the automotive aftermarket industry, do DORM’s fundamentals position it well to capitalize on the sector’s growth momentum? Read more….
The automotive aftermarket industry has experienced steady growth in recent years, driven by the increasing age and number of vehicles on the road. Long-term auto loans and durable cars have led to a record-high average road age for American motorists.
In 2024, passenger cars and light trucks in the U.S. had an average age of 12.6 years, slightly up from 12.5 years in 2023. This upward trend in vehicle age has created a growing demand for aftermarket parts.
As vehicles age, mechanical issues naturally increase, and the auto parts industry has been quick to respond. With more vehicles on the road, the need for replacement components has surged.
The global vehicle fleet is expected to continue expanding, reaching 1.7 billion light vehicles and 85 million medium and heavy commercial vehicles by 2033. This growth presents a promising outlook for the aftermarket industry, signaling a robust future for auto parts suppliers as demand for maintenance and repairs rises.
Amid this growth, Dorman Products, Inc. (DORM) seems to be well-positioned to capitalize on the sector’s growing momentum. Reflecting its strong market position and growth potential, DORM’s stock has climbed 18.4% over the past six months and 54.4% over the past year, closing its latest trading session at $126.49.
Now, let us discuss the factors that could affect the stock’s growth trajectory.
Recent Developments
On October 21, 2024, DORM announced the release of new aftermarket components and assemblies, expanding its catalog of more than 133,000 SKUs. Products, including an exhaust manifold repair clamp, a transmission gear shift bracket, and a flexible braided stainless steel fuel line, among others, were reported to be released.
The release of new aftermarket exclusives and first-to-aftermarket solutions could provide millions of repair opportunities for parts distributors, retailers, and repair shops. This is expected to enhance DORM’s portfolio of offerings.
On September 16, 2024, DORM announced the release of hundreds of new aftermarket automotive components and assemblies. The company’s newly announced releases included an upgraded loaded magnetic strut and ready-to-install strut assembly, a fuel pump driver module, a turbocharger installation kit, and a turbocharger oil feed line.
The release broadens DORM's product portfolio, strengthening the company's position in the auto parts industry.
Stable Historical Growth
Over the past three years, DORM has demonstrated consistent growth across key financial metrics. Its revenue and EBITDA grew at a CAGR of 16.4% and 24.9%, respectively. Moreover, net income and EPS expanded at a CAGR of 11.7% and 12.9%, respectively.
Sound Financials
For the fiscal 2024 third quarter that ended September 28, 2024, DORM’s net sales increased 3.2% year-over-year to $503.77 million. Its adjusted gross profit rose 11.2% from the year-ago value to $203.80 million.
Additionally, the company’s adjusted net income and adjusted EPS grew 36.1% and 40% from the prior year’s quarter to $60.24 million and $1.96, respectively. As of September 28, 2024, DORM’s cash and cash equivalents stood at $45.13 million, compared to $36.81 million on December 31, 2023.
Optimistic Analyst Estimates
Analysts expect DORM’s revenue and EPS for the fiscal 2024 fourth quarter, which ended in December 2024, to increase 6% and 25.3% year-over-year to $523.95 million and $1.97, respectively. Moreover, the company exceeded the consensus EPS estimates in each of the four trailing quarters, which is noteworthy.
Furthermore, for the fiscal 2025 first quarter (ending in March), DORM’s revenue and EPS are expected to rise 2.9% and 14.3% year-over-year to $482.23 million and $1.50, respectively.
High Profitability
DORM's trailing 12-month gross profit margin of 39.54% is 6.1% higher than the industry average of 37.27%. Its trailing-12-month EBITDA margin stands at 20.27%, 79% higher than the industry average of 11.33%.
In addition, the company boasts a trailing 12-month net income margin of 9.43%, which is 124.6% higher than the sector average of 4.20%. Also, the stock's trailing 12-month levered FCF margin of 9.57% is 109.7% higher than the industry average of 4.57%.
POWR Ratings Reflects Optimism
DORM’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
DORM has an A grade for Sentiment, which is in line with the optimistic analyst estimates. Plus, the stock holds a B grade for Quality, supported by profitability measures that exceeded industry benchmarks. Moreover, the company earns a B grade for Stability, in line with its 60-month beta of 0.88.
Within the A-rated Auto Parts industry, DORM is ranked #7 out of 60 stocks. Beyond what is stated above, we have also given DORM grades for Momentum, Value, and Growth. Get all DORM ratings here.
Bottom Line
Fueled by new and improved aftermarket exclusives and first-to-aftermarket solutions that expand its portfolio, DORM’s position in the automotive aftermarket industry seems quite strong. Coming with solid financials, high profitability, low volatility, and optimistic analyst estimates, DORM is well-positioned to capitalize on the automotive aftermarket boom.
How Does Dorman Products, Inc. (DORM) Stack Up Against Its Peers?
Although DORM’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Auto Parts industry:
DENSO Corporation (DNZOY)
Continental Aktiengesellschaft (CTTAY)
Strattec Security Corporation (STRT)
To explore more A or B-rated Auto Parts stocks, click here.
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DORM shares fell $1.09 (-0.86%) in premarket trading Friday. Year-to-date, DORM has declined -2.36%, versus a 4.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Aritra_Gangopadhyay
Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.
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