2 Stocks to Watch From the Promising Auto Replacement Parts Industry

Industry Overview - The automotive replacement parts industry is experiencing growth driven by an aging vehicle fleet, with the average age of vehicles in the U.S. reaching 12.6 years in 2024, leading to increased demand for repairs and maintenance [8] - The industry's dynamics are shifting due to the electrification, autonomy, and digitization of vehicles, which require advanced components and skilled technicians, creating new growth opportunities [2] - Affordability issues are expected to persist, encouraging vehicle owners to opt for repairs over new purchases, further boosting demand for replacement parts [9] Market Performance - The Zacks Automotive Replacement Parts industry has underperformed compared to the Auto, Tires, and Truck sector and the S&P 500, declining 17% over the past year while the sector and S&P 500 grew by 27% and 29% respectively [11] - The industry's current valuation, based on the EV/EBITDA ratio, is 8.8X, significantly lower than the S&P 500's 18.84X and the sector's 22.78X, indicating potential value opportunities [12] Key Players - Dorman Products is a key player in the aftermarket industry, focusing on replacement and upgrade parts, with a strong balance sheet and a debt-to-capitalization ratio of 28%, supported by share buybacks [21] - Standard Motor Products is a leading manufacturer of automotive replacement parts, with recent acquisitions aimed at expanding geographic presence and improving cost savings, currently holding a Zacks Rank 3 (Hold) [23][24]