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small-cap

Book Profits on this Small-Cap Auto Components Play – SMP

Dec 10, 2021 | Team Kalkine
Book Profits on this Small-Cap Auto Components Play – SMP

Standard Motors Products, Inc.

SMP Details

Standard Motor Products, Inc. (NYSE: SMP) is a leading automotive components producer and distributor in the automotive aftermarket, with a complementary concentration on the heavy-duty, industrial, and original equipment industries. It generates its revenues through two segments, namely, 1) Engine Management and 2) Temperature Control. 

Latest News:

  • New Appointments: On November 01, 2021, SMP announced the appointment of Anthony Cristello as Vice President of Investor Relations. Mr. Cristello will oversee and improve the company's corporate messaging strategy to investors, establish outreach targets, report on industry trends, new laws, and assist the executive team with business development and government relations.
  • Quarterly Dividend: The firm declared a dividend of USD 0.25 per common share on October 28, 2021, which was paid on December 01, 2021, to shareholders of record on November 15, 2021.

9MFY21 Results:

  • Upsurge in Revenues: The company reported an increase of 16.92% in net sales to USD 988.94 million during 9MFY21 (ended September 30, 2021) compared to USD 845.85 million during 9MFY20, due to an increase in sales across both divisions.
  • Progress in Net Earnings: SMP reported an increase in net earnings to USD 72.20 million during 9MFY21 vs. USD 48.22 million during 9MFY20.
  • Leveraged Balance Sheet: As of September 30, 2021, the company had cash & cash equivalents of USD 33.14 million and total debt (including notes payables) of USD 131.95 million.

Key Risks:

  • Customer Concentration Risk: In FY20 and FY19, the company's top five individual clients accounted for 68% and 69% of net sales, respectively. Any of these customers' loss, or a significant drop in purchasing, might have a significant negative impact on SMP's company and financial health.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

  • % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.