Dorman Products, Inc. (DORM): what the price requires
At today's price, Dorman Products, Inc. (DORM) is priced for +3.9% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/DORM
Headline
| Field | Value |
|---|---|
| Ticker | DORM |
| Company | Dorman Products, Inc. |
| Current price | $138.71/sh |
| Composition | Light Duty 79% / Heavy Duty 11% / Specialty Vehicle 10% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.0% |
| Operating margin today | 15.4% |
| Margin compression implied | -11.4pp |
| Implied growth | 3.9% |
| Multiple paid | 14x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 8.9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.89σ |
| cohort percentile (of 210 peers) | 31 |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.75x | 5 | expensive |
| Earnings | 2.29x | 3 | expensive |
| Relative | 1.31x | 3 | expensive |
| Growth | 1.19x | 3 | expensive |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.3%); the inversion above states its own rate.
Per-Model Detail (n=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $44.16 | 3.14x | yes | FCF base $0.1B, growth 5% (input: historical growth), terminal g 4.0%, WACC 8.3%, 6yr projection |
| DCF Exit Multiple | Growth | $125.47 | 1.11x | yes | Exit EV/EBITDA: 14.9x / 16.9x / 18.9x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $117.10 | 1.18x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.7x / 20.0x / 23.3x (bear / base = reference held flat / bull), EV/EBITDA 13x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $67.60 | 2.05x | yes | BV/sh $48.21, ROE (TTM) 13.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $79.39 | 1.75x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $116.13 | 1.19x | yes | Rev $2.2B, growth 5% (input: historical growth; tapered), Terminal P/S: 1.6x / 2.0x / 2.3x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $60.62 | 2.29x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.23B × (1−23%) / WACC 8.3% → EPV (no growth) |
| Residual Income | Asset | $81.89 | 1.69x | yes | BV $48.21 + 5yr PV of (ROE (TTM) 13.0% − Kₑ 9.3%) × BV; BV grows 8.4%/yr |
| Graham Number | Asset | $82.01 | 1.69x | yes | √(22.5 × EPS $6.20 × BVPS $48.21) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $102.79 | 1.35x | yes | EBITDA $0.28B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | $9.02 | 15.38x | yes | FCF $70.7M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $1.87 | 74.18x | yes | SBC-adj FCF $0.05B (FCF $0.07B − SBC $0.02B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | $5.20 | 26.68x | yes | EPS $6.20 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $13.50 | 10.27x | yes | BV $48.21 × (ROIC 2.3% / WACC 8.3%) |
| P/Sales Sector | Relative | $106.07 | 1.31x | yes | Revenue $2.15B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $67.03 | 2.07x | yes | EPS $6.20 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $397.6m |
| Net debt / NOPAT (after-tax) | 1.57x |
| Net debt / operating income (pre-tax) | 1.22x |
| Interest coverage | 11.9x |
| Share count CAGR (buyback) | -0.9% |
| Burning cash | no |
Bullet Takeaways
Dorman engineers and sells aftermarket auto parts, mostly for light-duty vehicles, and its edge is a new-product-development engine that brings replacement parts to market that the original manufacturers often do not offer. Operating margin is about 12.9% and return on equity 13%.
At about $125 the price inverts to only roughly 1.4% operating-profit growth a year, an undemanding bar, and the reverse-DCF base case lands near $200, above the price. Most methods support the price or exceed it.
The near-term squeeze is tariffs. First-quarter EPS fell 24% as tariff costs hit a peak the company expects to ease through the year. Free cash flow is low relative to earnings, and net debt is about $398 million against thin liquid assets, so working capital and tariff timing matter.
Bull Case
The structural advantage that defines Dorman is its new-product-development engine, and it is a genuine moat in a fragmented industry. Dorman engineers and supplies aftermarket replacement parts for vehicles, and a large share of its catalog consists of parts it brings to market that the original equipment manufacturers either do not sell into the aftermarket or sell only at high dealer prices. By reverse-engineering and improving on those parts, often before anyone else offers a replacement, Dorman builds a catalog of tens of thousands of unique SKUs that repair shops and parts retailers depend on. That breadth and the engineering behind it are hard to replicate, and the demand is defensive: cars need repairs regardless of the economy, and an aging vehicle fleet steadily expands the addressable base.
The segment results show the engine working even in a tough quarter. First-quarter 2026 net sales rose 4.2% to $528.8 million, led by Light Duty and Heavy Duty, and the company expanded operating margins across all three segments, with Light Duty up 290 basis points to 19%, Specialty up 350 basis points to 17%, and even the freight-recession-pressured Heavy Duty segment up 150 basis points. Pricing actions and product mix are lifting the underlying profitability of the business beneath the tariff noise.
The valuation gives the moat little credit, which is the opportunity. At about $125 the price inverts to only roughly 1.4% operating-profit growth a year, a very low bar for a company guiding to 7% to 9% sales growth for the full year and reaffirming adjusted EPS of $8.10 to $8.50. The reverse-DCF base case lands near $200, well above the price, and the relative, asset-based, and earnings-power methods mostly sit at or above the quote. Management reaffirmed guidance even after a tariff-pressured quarter, announced a $500 million buyback, and analysts carry a Strong Buy consensus with an average target near $152 to $157. The bull thesis is a defensive, moat-protected parts engineer trading as if it barely grows, with the tariff drag set to ease.
Bear Case
The structural weakness is on the balance sheet and in how little of Dorman's reported profit actually converts to cash. Trailing operating income is about $278 million, but free cash flow is only about $71 million, a low conversion rate that reflects the heavy working capital an aftermarket-parts business ties up in a vast, slow-moving inventory of tens of thousands of SKUs. The FCF-yield method, capitalizing that thin free cash flow, lands in the single digits, far below the price, and the stock-compensation-adjusted version lower still. Net debt is about $398 million against only $43 million of liquid assets, so the company runs with little cash cushion and depends on its inventory turning and its receivables collecting on schedule. A company that earns well on paper but converts poorly to cash is more fragile than its margin suggests.
The tariff exposure makes that fragility acute right now. First-quarter EPS fell 24% to $1.43 as gross margin collapsed from 40.9% to 36.0% on tariff-related costs, and while management called this the peak tariff quarter for 2026, that is a forecast, not a fact. Dorman sources a large portion of its parts from overseas, so it is directly exposed to trade policy it cannot control, and a further escalation or a slower-than-expected easing would keep compressing margins and the cash flow that is already thin. The pricing actions that protect margin also risk volume if customers push back, a tension visible in the quarter where sales rose on price but volumes were soft.
The cyclical and segment risks compound the picture. The Heavy Duty segment, tied to the freight market, saw sales fall 5% amid a freight recession, and Light Duty demand, while resilient, is not immune to a consumer that defers repairs in a downturn. The valuation does embed a low growth bar, so the stock is not expensive on its multiples, but the reasons it looks cheap, weak cash conversion, tariff exposure, and a leveraged balance sheet with little liquidity, are real structural features, not temporary noise. The bet at $125 (June 27, 2026) is that tariffs ease, cash conversion improves, and the moat compounds the way the base-case fair value implies, and the bear case is that the gap between reported earnings and actual cash, plus the tariff overhang, keeps the stock cheaper than its profit suggests it should be.
Valuation
At about $125 the price inverts to roughly 1.4% operating-profit growth a year over five years, with implied margin near 3.6% against today's 12.9%. The solve runs at an 8.9% cost of capital, and it is moderately sensitive: each percentage point of cost of capital moves the implied growth by roughly 5.7 points. The implied pace is well below the company's guided 7% to 9% sales growth, which is why the reverse-DCF base case, near $200, sits comfortably above the price.
The model X-ray mostly supports the price. The asset-based methods land in the high $60s to low $80s off a $48.21 book value, below the price, because return on equity of 13% only modestly exceeds the cost of equity. But the relative methods land near or above: the sector P/E near $117, EV/EBITDA near $103, and the price-to-sales near $106. The growth methods straddle, with the exit-multiple DCF near $115 and the future-market-cap projection near $105. The earnings-power value at zero growth lands near $61. The clear outlier is the FCF-yield method at about $9, which reflects the low free-cash-flow conversion and is the single most important caution in the valuation.
The pattern is a quality aftermarket business priced at an undemanding growth assumption, with the reverse-DCF base case and most multiples above the price, but with the cash-flow methods flagging that reported earnings do not convert cleanly to cash. The bet at $125 is that the moat delivers the guided growth, that tariffs ease, and that cash conversion improves toward the level the earnings imply, in which case the base-case fair value says the stock is worth meaningfully more. The risk the bullish methods understate is the working-capital intensity and tariff exposure that keep free cash flow thin.
Catalysts
First-quarter 2026 results, reported May 4, were the most recent catalyst. Net sales rose 4.2% to $528.8 million, led by Light Duty and Heavy Duty, but diluted EPS fell 24% to $1.43 as gross margin dropped from 40.9% to 36.0% on tariff-related costs. Management said the quarter represented the highest level of tariff cost it expects to see in 2026 and reaffirmed full-year guidance for 7% to 9% sales growth, GAAP EPS of $7.57 to $7.97, and adjusted EPS of $8.10 to $8.50. The company also has a $500 million share buyback in place, and the stock dipped on the report.
The forward catalysts center on tariff relief and margin recovery. The key question is whether tariff costs ease through the year as management expects, restoring the gross margin that fell sharply in the first quarter. Operating-margin expansion across all three segments is the underlying positive to watch, against the freight-recession headwind in Heavy Duty. The watch items are the trajectory of tariff costs and gross margin quarter to quarter, the pace of new-product introductions that drive the catalog, free-cash-flow conversion and inventory management, buyback execution, and Light Duty demand resilience. Analysts carry a Strong Buy consensus with targets near $152 to $157.
Peer Cohorts (Per Segment, With Filing Citations)
Light Duty (reported)
- GPC (GENUINE PARTS CO)
- (no filing in the citation store)
- LKQ (LKQ CORPORATION)
- (no filing in the citation store)
- GNTX (GENTEX CORPORATION)
- (no filing in the citation store)
- PHIN (PHINIA INC.)
- (no filing in the citation store)
- GTX (Garrett Motion Inc.)
- (no filing in the citation store)
- BWA (BORGWARNER INC)
- (no filing in the citation store)
Heavy Duty (reported)
- GPC (GENUINE PARTS CO)
- (no filing in the citation store)
- LKQ (LKQ CORPORATION)
- (no filing in the citation store)
- MOD (MODINE MANUFACTURING CO)
- (no filing in the citation store)
- PHIN (PHINIA INC.)
- (no filing in the citation store)
Specialty Vehicle (reported)
- PATK (PATRICK INDUSTRIES, INC.)
- (no filing in the citation store)
- LCII (LCI INDUSTRIES)
- (no filing in the citation store)
- THO (THOR INDUSTRIES, INC.)
- (no filing in the citation store)
- HOG (Harley-Davidson, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.