With rising economic growth and more individuals aspiring to own vehicles, the automotive market is booming, resulting in higher demand for auto parts. Auto parts are critical components that form part of vehicles; hence, as the auto industry grows, the market for auto parts will also flourish.
Given the industry’s bright growth prospects, quality auto parts stocks Magna International Inc. (MGA), Dorman Products, Inc. (DORM), and Garrett Motion Inc. (GTX) could be ideal portfolio additions.
Auto parts are critical for the automotive industry, and with the rapidly increasing production of vehicles, the segment is experiencing unprecedented growth. Further, with the recent inclination towards fuel-efficient vehicles, electric vehicles, and other automation, the auto parts market is evolving swiftly.
According to a MarkLines report, new vehicle sales in the U.S. during January 2025 reached 1,112,944 units, reflecting an increase of 3.8% from the same month last year. Deflecting from the previous trends where sales generally declined during the beginning of the year, the market showed strong performance and also maintained its streak of growth for four consecutive months.
The uptick in the new vehicle sales will positively navigate the trajectory of the auto parts market. This is because more sales will increase the demand for auto parts as well, and the market transformation through EVs and advanced technologies will accelerate it further.
The automotive parts market is expected to reach $111.53 billion in 2025 and is expected to grow to $140.12 billion by 2030 at a CAGR of 4.7%. Critical drivers like the growing automotive industry, the introduction of innovative technologies, evolving government standards and regulations, and EV evolution will contribute to the market expansion.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best Auto Parts industry stocks, beginning with the third choice.
Stock #3: Magna International Inc. (MGA)
Headquartered in Aurora, Canada, MGA designs, engineers, and manufactures components, assemblies, systems, subsystems, and modules for original equipment manufacturers of vehicles and light trucks globally. It operates in four segments: Body Exteriors & Structures; Power & Vision; Seating Systems; and Complete Vehicles.
On February 11, 2025, MGA expanded its long-term innovation partnership with Mercedes-Benz, underscoring the companies’ commitment to innovation and excellence in the automotive industry. The collaboration has strengthened through development and engineering services up to the production of the all-new electric model of Mercedes-Benz’s iconic off-roader.
MGA’s eDS Duo electric drive system demonstrates an innovative approach to delivering advanced powertrain solutions, making the transition from internal combustion engines to battery electric vehicles seamless.
MGA’s sales increased 1.7% year-over-year to $10.63 billion during the fourth quarter that ended December 31, 2024. Its income from operations before income taxes rose 22.9% from the previous year’s period to $381 million. The company's adjusted EBIT of $689 million reflects an increase of 23.5% year-over-year.
Furthermore, the company’s net income and EPS amounted to $234 million and $0.71 for the quarter.
According to the outlook for fiscal year 2025, MGA expects sales of $38.60 billion and $40.20 billion, and its adjusted EBIT margin is expected to be between 5.3% and 5.8%. It also expects a free cash flow of $1.5 billion or more by 2026.
Analysts expect MGA’s revenue and EPS for the fiscal year (ending December 2026) to increase 3% and 24.6% year-over-year to $40.77 billion and $6.35, respectively.
The stock has plunged 5.1% over the past month to close the last trading session at $38.16.
MGA’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Growth and Value. Within the A-rated Auto Parts industry, MGA is ranked #12 of 60 stocks.
Click here to access additional MGA ratings for Quality, Stability, Sentiment, and Momentum.
Stock #2: Dorman Products, Inc. (DORM)
DORM internationally supplies replacement and upgrade parts for passenger cars, light trucks, medium- and heavy-duty trucks, utility terrain vehicles, and all-terrain vehicles in the motor vehicle aftermarket industry. It offers engine products, like intake and exhaust manifolds, fans, thermostat housings, and throttle bodies.
On September 16, 2024, DORM released hundreds of new aftermarket automotive components and assemblies, which provide millions of repair opportunities for parts distributors, retailers, and repair shops. The new offerings also allow the freedom and ability to keep vehicles on the road for everyday drivers.
During the 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 grew 11.2% from the year-ago value to $203.80 million. The company's adjusted net income and EPS came in at $60.24 million and $1.96, up 36.1% and 40% from the prior year’s quarter, respectively.
The company expects its adjusted EPS to range between $6.85 and $6.95 for the fiscal 2024.
Street expects DORM’s revenue for the fourth quarter (ended December 2024) to increase 6% year-over-year to $523.95 million. The company’s EPS for the same period is expected to grow 25.3% from the prior year to $1.97. Moreover, it has topped the consensus EPS estimates in all of the trailing four quarters.
Over the past six months, DORM’s stock has gained 17.8% and 54% over the past year to close the last trading session at $126.14.
DORM’s POWR Ratings reflect bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
DORM has an A grade for Sentiment. It also has a B grade for Quality and Stability. It is ranked #9 among 60 stocks within the A-rated Auto Parts industry.
To see the other ratings of DORM for Growth, Value, and Momentum, click here.
Stock #1: Garrett Motion Inc. (GTX)
Based in Rolle, Switzerland, GTX designs, manufactures, and sells turbocharging, air and fluid compression, and high-speed electric motor technologies for original equipment manufacturers and distributors internationally. It provides cutting-edge technology for mobility and industrial space.
In terms of forward EV/Sales, GTX is trading at 0.98x, 25.6% lower than the industry average of 1.31x. Likewise, the stock’s forward Price/Sales multiple of 0.57 is 42.8% lower than the industry average of 0.99. Also, its forward non-GAAP P/E of 8.08x is 53.1% lower than the industry average of 17.23x.
During the third quarter that ended September 30, 2024, GTX reported net sales of $826 million and gross profit of $166 million. Its income before taxes came in at $76 million, up 8.6% year-over-year. In addition, the company's net income was $52 million for the quarter, while its EPS was $0.24, indicating growth of 4.3% from the prior-year quarter.
As per the company's full-year 2024 outlook, GTX expects net sales between $3.40 billion and $3.50 billion. Its net income is projected at $240 million to $255 million and adjusted EBITDA to be $585 million - $605 million. Also, the company's adjusted free cash flow is set to range from $300 million to $350 million.
For the second quarter ending June 2025, the company’s revenue is expected to grow 1.4% year-over-year to $902 million, while GTX’s EPS for the same quarter is projected to increase 15.4% year-over-year to $0.32. Also, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of GTX have surged 14% over the past six months to close the last trading session at $9.27.
GTX’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
GTX has an A grade for Quality and a B grade for Value and Stability. It is ranked #7 out of 60 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have GTX ratings for Momentum, Sentiment, and Growth. Get all GTX ratings here.
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MGA shares were trading at $37.84 per share on Thursday morning, down $0.32 (-0.84%). Year-to-date, MGA has declined -9.45%, versus a 3.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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