U.S. Auto Parts Network
Founded in 1995, U.S. Auto Parts started as a mainstream distributor of aftermarket auto parts; five years later, the company launched its first website. I'd say that was definitely a smart move. At present, the company has a group of websites that has roughly 550,000 SKUs (Stock Keeping Units). Not only does each product have a detailed description, but the database has sophisticated algorithms -- for example, the system knows that a Chevy Tahoe and a Suburban have the same type of bumper. This is the result of an exacting, ongoing manual process. The company has been able to enhance the database through outsourcing some of the work to low-cost areas, such as the Philippines and India.
U.S. Auto Parts is not without its competitors, which include national retailers like AutoZone
Overall, the auto parts market is still fragmented and inefficient, with a variety of importers, distributors, and wholesalers. U.S. Auto Parts is essentially leveraging the Internet to disintermediate the supply chain.
Without a doubt, there is an enormous market opportunity for the company. According to the Automotive Aftermarket Industry Association's 2006-2007 Aftermarket Factbook, the addressable market is about $91.3 billion.
The company's growth has been particularly strong, showing its advantages in this market. From 2003 to 2005 (including the acquisition of Partsbin), revenues have increased from $31.6 million to $98.1 million. As for the first nine months of 2006, revenues were $107.3 million and profits were $1.6 million.
At the current valuation, U.S. Auto Parts is selling at roughly 2.5 times its revenues, which may seem pricey to some. But the company is growing at a quick rate and has a differentiated offering, which would take time to replicate. All in all, it's a stock that's definitely worth a closer look.
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