Is one man's trash really another's treasure? Fenix Parts, a new company about to make its debut on the Nasdaq stock exchange, firmly believes so. The company recycles and sells auto parts, an unglamorous but potentially profitable business niche. Let's pop open the hood and look inside one of the more offbeat IPOs for this month.

Recycling and replacing
It's not only its line of work that makes Fenix Parts an atypical stock issue, it's also the structure of the company: Technically speaking, there really isn't one.

At the moment, it's essentially an empty vessel waiting to be filled with assets. It'll use most of the proceeds from the IPO to acquire a set of eight smallish companies engaging in its core activity. All have signed agreements to become Fenix Parts subsidiaries in exchange for cash and stock.

This clutch of companies is generally concentrated in the Northeast, operating specifically in New York, Pennsylvania, New Jersey, and the lower parts of Ontario, Canada. One entity is located in Florida.

Once those resources are pooled, the resulting company will "create a network that offers sales, fulfillment and distribution in key regional markets in the United States and Canada," according to Fenix Parts' latest IPO prospectus.

The unified company's business is refreshingly straightforward. It buys damaged vehicles, typically at salvage auctions, inventories their parts, and dismantles them. The usable components are then refurbished and sold back to the market.

Collectively, the units that will make up Fenix Parts drew revenue of $108 million in 2014, with a bottom-line loss of nearly $4 million.

Other dogs in the junkyard
Joining forces is a good move in this industry, because as Fenix Parts admits, it's fragmented and competitive. According to the company's figures, there are roughly 9,000 vehicle recycling facilities in North America.

That's a lot of competition, and Fenix Parts won't be the only player with bulk and muscle; its publicly traded peer LKQ (NASDAQ:LKQ) was a Fortune 500 corporation last year. LKQ is also significantly bigger and more profitable, with $6.7 billion in revenue and a bottom line of $382 million in 2014. Fenix estimates that LKQ holds less than 10% of the market, however.

Driving toward growth
In its prospectus, Fenix Parts opines that demand for the products it sells "is highly stable and marked by consistent long-term growth due to a number of favorable trends, including the number of vehicles on the road ... the increasing miles driven and the number and age of drivers."

That's a valid point, so it seems the timing is good for further consolidation in the business. Recycling car components isn't a particularly high-margin line of work, but if Fenix Parts continues to absorb smaller players, it can compete that much better on economies of scale. And large-scale competition in its niche is fairly limited.

I think there's upside potential here, in a business where money can be made. This is a stock worth watching.

We'll see if the market agrees -- and trades up these shares accordingly. The Fenix Parts IPO is scheduled to take place on Thursday, May 14. The company will be listed on the Nasdaq under the ticker symbol FENX.

Eleven million shares are to be sold at a price of $9 to $11 apiece, and the lead underwriters of the issue are Bank of Montreal's BMO Capital Markets and Stifel.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.