Breaking Down CarParts.com, Inc. (PRTS) Financial Health: Key Insights for Investors

You're looking at CarParts.com, Inc. (PRTS) and seeing a stock that's struggled to find footing this year, so you need to know if the recent strategic moves matter or if it's just more noise. The direct takeaway is that the company is in a tough spot, posting a Q3 2025 net loss of $10.9 million on revenue of $127.8 million, which was a 12% decrease year-over-year, but management is defintely taking aggressive steps to fix the margin problem. Here's the quick math: the year-to-date net loss through Q3 2025 sits at nearly $38.9 million, driven partly by the pressure from 55-75% import tariffs on key goods, but the recent $35.7 million strategic investment from partners like ZongTeng Group is a crucial lifeline aimed at cutting logistics costs and expanding their product range. We need to look past the top-line revenue dips and focus on whether their push for operational efficiency and the goal of becoming free cash flow positive in 2026 can actually turn the tide against persistent gross margin compression.

Revenue Analysis

You're looking at CarParts.com, Inc. (PRTS) and trying to figure out if the recent revenue dips are a red flag or a strategic pivot. The direct takeaway is this: CarParts.com is intentionally sacrificing near-term top-line growth-revenue-to drive profitability, a move that shows up as a volatile year-over-year (YoY) performance in 2025.

The company is shifting its focus from simply chasing every sale, no matter the cost, to a more disciplined customer acquisition strategy. This is a tough but necessary trade-off for an e-commerce player fighting for margin. You need to watch their gross profit (revenue minus cost of goods sold) and cash flow, not just the sales number.

The Strategic Revenue Shift in 2025

CarParts.com's primary revenue source is the sale of new, quality automotive parts and accessories through its e-commerce channel. This includes collision, replacement, and mechanical parts, with collision and replacement making up about 70% of the business. The company is actively moving away from its lower-margin Marketplace segment, which faces intense pricing pressure from non-compliant imported products, and is doubling down on its owned site, CarParts.com.

This strategic shift is the main reason for the revenue decline you see in the latest quarter. Instead of spending heavily on advertising to acquire low-value customers, they are rationalizing marketing spend to improve profitability. Here's the quick math on the quarterly volatility:

• Q1 2025 Net Sales: $147.4 million (down 11% YoY)
• Q2 2025 Net Sales: $151.9 million (up 5% YoY)
• Q3 2025 Net Sales: $127.8 million (down 12% YoY)

Year-to-Date Revenue Performance and Trends

The overall picture for the year is one of contraction. The Trailing Twelve Months (TTM) revenue as of the end of Q3 2025 stood at $560.63 million, reflecting an 8.35% year-over-year decrease. This decline is a direct result of the company's push for efficiency, which led to a reduction in advertising expense and a focus on higher-margin sales. The company is also emphasizing higher-margin, recurring revenue streams, like its CarParts+ and Roadside Assistance Memberships, which have surpassed 8,000 paid members as of Q3 2025.

What this estimate hides is the sequential improvement in operational efficiency, even with lower sales. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) has improved quarter-over-quarter in 2025, suggesting the strategy is working on the cost side. You can defintely see the focus on the bottom line over the top line. For a deeper dive into the capital structure supporting this shift, check out Exploring CarParts.com, Inc. (PRTS) Investor Profile: Who's Buying and Why?

New Revenue Opportunities and Segment Contribution

A significant change in the revenue outlook is the strategic investment and partnership closed in early September 2025, valued at $35.7 million, with A-Premium, ZongTeng Group, and CDH Investments. This partnership immediately expands CarParts.com's product range by adding over 100,000 new Stock Keeping Units (SKUs), particularly boosting mechanical parts coverage.

This new segment contribution is already generating about $20 million in annual revenue and has the potential to grow to over $100 million annually as the integration fully progresses. Furthermore, the mobile app is becoming a key driver, with its revenue contribution to e-commerce sales increasing from under 9% at the start of the year to more than 13% by the end of Q3 2025.

The table shows a clear pattern: revenue has been choppy, but the gross margin-the profit on each part sold-is trending up, from 32.1% in Q1 to 33.1% in Q3 2025. This confirms the management's focus on margin over volume. The next step is to monitor Q4 results to see if the new strategic partnerships start to materially offset the revenue decline from the marketing rationalization.

Profitability Metrics

You're looking for a clear picture of CarParts.com, Inc. (PRTS) profitability, and the most recent numbers from the third quarter of fiscal year 2025 (Q3 2025) tell a story of strategic, but painful, transition. The direct takeaway is that while the company's gross margin is holding steady in the low-30s, its operating and net margins remain deep in the red, reflecting the high cost of customer acquisition and operational scale in the e-commerce auto parts space.

For Q3 2025, which ended September 27, 2025, CarParts.com, Inc. reported $127.8 million in net sales. Here's the quick math on the key margins:

• Gross Profit Margin: The company achieved 33.1% gross margin on a gross profit of $42.3 million.
• Operating Profit Margin: With total operating expenses at $52.3 million, the operating loss was ($10.0) million, resulting in a -7.82% operating margin.
• Net Profit Margin: The net loss for the quarter was ($10.9) million, which translates to a -8.53% net profit margin.

It's a tough environment, and negative margins show the company is defintely prioritizing market presence and strategic investment over near-term bottom-line profitability.

Profitability Trends and Operational Efficiency

The trend analysis shows a company deliberately sacrificing top-line revenue for margin protection and efficiency. Net sales decreased 12% year-over-year in Q3 2025, a drop management attributes to rationalizing marketing spend-essentially, cutting back on unprofitable advertising to focus on higher-margin sales. This is a critical move: stop chasing low-value customers.

Still, the Gross Margin of 33.1% in Q3 2025 was down 210 basis points (bps) from the year-ago quarter. This margin compression is primarily due to product mix shifts and the ongoing impact of import tariffs, a persistent headwind for the industry. The good news is that operational efficiency efforts are starting to show up lower down the income statement. Total operating expenses fell to $52.3 million in Q3 2025 from $60.9 million in the prior-year quarter, driven by favorable marketing spend and headcount reductions.

You can see how the company is trying to manage costs in response to these tariff pressures by exploring Exploring CarParts.com, Inc. (PRTS) Investor Profile: Who's Buying and Why?

Industry Comparison: The Margin Gap

When you compare CarParts.com, Inc.'s profitability to its larger, omni-channel competitors, the structural differences in their business models become clear. The e-commerce pure-play model typically generates a lower gross margin but should theoretically scale to a higher operating margin due to lower fixed costs (no massive store network). However, that scale isn't there yet for PRTS.

The 33.1% gross margin for CarParts.com, Inc. is substantially lower than AutoZone's 52.7% and Advance Auto Parts' 43.5% in their respective 2025 quarters. This gap reflects the pricing pressure and higher reliance on private-label products and direct-to-consumer shipping costs inherent in the pure-play online model. The fact that PRTS is still running a negative operating margin, unlike its profitable competitors, highlights the need for their current focus on cost management and strategic partnerships to drive margin recovery and reach their goal of being free cash flow positive by 2026.

Debt vs. Equity Structure

You're looking at CarParts.com, Inc. (PRTS)'s balance sheet to understand how they fund their operations, and the short answer is: their reliance on debt is higher than the industry norm, but they've kept their short-term borrowing clean. The company's capital structure, as of the most recent quarter in 2025, shows a notable tilt toward debt, which is something a seasoned investor needs to map against their growth strategy.

For the most recent quarter (MRQ) in 2025, CarParts.com, Inc. (PRTS) reported a total debt of approximately $56.69 million. This debt is split into long-term and short-term obligations, with the bulk sitting on the long-term side. Specifically, their Long-Term Debt-to-Equity ratio was around 75.97%, indicating that the primary source of leverage is tied up in multi-year commitments, like capital leases for their distribution network. Here's the quick math on the breakdown:

• Total Debt (MRQ 2025): $56.69 million
• Implied Long-Term Debt (MRQ 2025): Approximately $48.74 million
• Implied Short-Term Debt (MRQ 2025): Approximately $7.95 million

The company's overall Total Debt-to-Equity (D/E) ratio stood at 88.36% (or 0.88). This is a critical figure, as it tells you how much debt the company uses to finance its assets relative to the value of shareholders' equity. To be fair, a D/E ratio below 1.0 is generally considered acceptable, but context matters immensely.

When you compare this to the 'Auto Parts' industry average D/E ratio, which is closer to 0.58, CarParts.com, Inc. is operating with significantly more financial leverage. This higher ratio suggests a greater reliance on debt financing over equity funding to fuel expansion and working capital needs. It's a classic growth-stage trade-off: debt can magnify returns (earnings per share) but also amplifies risk during a market downturn or a period of soft consumer demand, which the company has faced in 2025.

In terms of recent debt management, the picture is defintely a mixed bag. A positive sign is that as of the third quarter of 2025, the company had no revolver debt and a cash balance of approximately $36 million. This means they aren't relying on their revolving credit facility for immediate liquidity, which is a good operational sign. However, the company has explicitly noted the risk that they may need to refinance their existing debt or obtain additional debt or equity to meet service obligations, especially as they evaluate various strategic alternatives. This tells you the capital structure is an active, near-term management focus. For a deeper dive into who is backing the company, you should check out Exploring CarParts.com, Inc. (PRTS) Investor Profile: Who's Buying and Why?

Here's a snapshot of the leverage profile compared to the industry:

The key takeaway is that CarParts.com, Inc. is comfortable using debt to fund its growth, but at a level that is materially higher than its peers. This makes the company more sensitive to interest rate changes and requires closer scrutiny of its cash flow generation in the coming quarters.

Liquidity and Solvency

You need to know if CarParts.com, Inc. (PRTS) can cover its short-term bills and fund its operations, and the answer is a qualified yes, but with a reliance on recent financing. The company's liquidity position as of the third quarter (Q3) of 2025 is tight but manageable, largely thanks to a significant capital injection.

The core measure of short-term health, the Current Ratio (Current Assets divided by Current Liabilities), stands at a healthy 1.71 for the most recent quarter. This means CarParts.com, Inc. has $1.71 in current assets for every dollar of current liabilities. This is defintely a strong indicator of liquidity.

However, the Quick Ratio (or Acid-Test Ratio), which strips out inventory-a less liquid asset-tells a different story, coming in at just 0.52. This low number is typical for a retailer, but it highlights a critical point: the company's liquidity is heavily tied up in its inventory, which was approximately $94.3 million as of September 27, 2025. If sales slow or inventory becomes obsolete, that Quick Ratio drops fast.

Working Capital Trends and Inventory Risk

The company's net working capital (Current Assets minus Current Liabilities) actually showed an improvement, rising from $48.4 million at the end of fiscal year 2024 to $59.7 million in Q3 2025. Here's the quick math: Current Assets grew from $138.9 million to $143.9 million, while Current Liabilities decreased from $90.4 million to $84.2 million over the same period (all figures in millions). The trend is positive, but the concentration in inventory is the real risk.

• Working Capital improved by $11.3 million.
• Inventory makes up about 65% of Current Assets.
• Accounts Payable decreased by nearly $7 million, a healthy sign of managing vendor obligations.

Cash Flow Statement Overview

The Cash Flow Statement reveals the underlying pressure on the business model. Over the trailing twelve months (TTM), CarParts.com, Inc. has been cash-flow negative from its core operations, which is the primary liquidity concern.

The TTM Cash Flow from Operating Activities of -$24.68 million shows the company is burning cash to run the business. This cash burn is why the Financing Cash Flow is so critical. The positive $31.3 million in Financing Cash Flow is almost entirely due to the $35.7 million strategic investment and the issuance of $25.0 million in convertible notes during Q3 2025. This external funding is what kept the cash balance at $36.0 million as of September 27, 2025.

Liquidity Strengths and Concerns

The main strength is the recent $35.7 million strategic investment, which has shored up the balance sheet and provided a crucial runway. The immediate concern is the reliance on that external capital to offset the negative operating cash flow. Management is aiming for free cash flow positivity in 2026, which is the action item to watch. Until then, the high Current Ratio is largely an illusion of strength because of the inventory component. You can dive deeper into this analysis in Breaking Down CarParts.com, Inc. (PRTS) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking for a clear-eyed assessment of CarParts.com, Inc. (PRTS) to decide if the current price makes sense. The short answer is that traditional valuation metrics are flashing red because the company is not profitable, but the low price-to-book ratio suggests a deep discount on its assets. The stock is defintely trading in distressed territory.

As of November 2025, CarParts.com, Inc. closed near $0.48 per share, reflecting a sharp decline of over 40.03% in the last 52 weeks alone. This price action tells you the market is deeply concerned about its path to profitability and cash burn. The stock's 52-week range is from a low of $0.46 to a high of $1.42, showing significant volatility and a clear downward trend in the past year. It's a tough environment for e-commerce companies still chasing positive cash flow.

Is CarParts.com, Inc. Overvalued or Undervalued?

To determine if CarParts.com, Inc. is overvalued or undervalued, we need to look beyond the stock chart and examine the core valuation multiples. Since the company is currently unprofitable, metrics tied to earnings show a negative picture, which is common for growth-focused companies that have hit a rough patch.

• Price-to-Earnings (P/E) Ratio: This ratio is effectively meaningless right now because the company has a net loss. The P/E ratio is listed as N/A, or a forecast shows a negative P/E of around -0.65x for the 2025 fiscal year. You can't use earnings to justify the price when there are no earnings.
• Enterprise Value-to-EBITDA (EV/EBITDA): This metric, which strips out capital structure and non-cash expenses, is also negative. The TTM (Trailing Twelve Months) EV/EBITDA is approximately -1.06 as of November 20, 2025, due to negative TTM EBITDA. This confirms the company is losing money on an operating basis, which increases near-term risk.
• Price-to-Book (P/B) Ratio: This is where the narrative shifts. With a P/B ratio of roughly 0.50 to 0.55, the stock is trading for about half of its book value (assets minus liabilities). This suggests the market is valuing the company's net assets at a significant discount, which can signal a deep value opportunity-or a value trap-if you believe the assets are worth more than the market currently implies.

Dividend Policy and Analyst Consensus

CarParts.com, Inc. is not a dividend-paying stock. The dividend yield and payout ratio are both 0.00%. This is expected for a company that is prioritizing cash for operations and strategic initiatives, especially while exploring strategic alternatives to maximize shareholder value, as mentioned in their Q2 2025 report. They are in capital preservation mode, not capital return.

Wall Street analysts are split but generally cautious. The consensus rating for CarParts.com, Inc. (PRTS) is a Hold, though some models show a 'Moderate Buy' based on a small number of analysts. The average 12-month price target is in a wide range, from a conservative $0.60 to an optimistic $1.85. Here's the quick math: the lower target of $0.60 implies an upside of about 25% from the recent price of $0.48, but that upside is still well below the 52-week high. The market is waiting for tangible evidence that the turnaround is working before they commit more capital. For a deeper dive into their operational challenges, you should read our full analysis at Breaking Down CarParts.com, Inc. (PRTS) Financial Health: Key Insights for Investors.

Risk Factors

You need to understand that CarParts.com, Inc. (PRTS) is navigating a tough economic environment, and their recent Q3 2025 results show the strain. While management is making smart, strategic moves, the near-term financial health is under pressure from external costs and internal execution risks. The core takeaway is that tariff headwinds and margin compression are the immediate threats, despite a clear long-term plan.

External and Industry Headwinds

The biggest external risk is the ongoing trade war impact. CarParts.com sources a significant portion of its private label products from Asia, and the current import tariffs are a direct hit to the cost of goods sold (COGS). Specifically, tariffs on Chinese imports are running between 55% and 75%, with Taiwan-sourced products facing about 25%. This is why their gross margin in Q3 2025 dropped to 33.1%, a decrease of 210 basis points (bps) from the year-ago quarter. Also, the competition is fierce, especially in the marketplaces segment, where an influx of non-compliant, low-cost products from China creates significant pricing pressure.

• Tariffs are the single largest external cost.

Operational and Financial Risks

The financial statements for 2025 clearly show widening losses, which is a major concern for investors. The company's strategic decision to rationalize marketing spend to improve long-term profitability resulted in a net sales decrease of 12% year-over-year, landing at $127.8 million in Q3 2025. This lower revenue, combined with the tariff-driven margin pressure, pushed the GAAP net loss to $10.9 million for Q3 2025, up from a $10.0 million loss in the prior year. Plus, the recent resignation of CFO Ryan Lockwood, effective November 21, 2025, adds an element of executive transition risk that investors defintely need to monitor.

Here's the quick math on the 2025 quarterly losses:

What this estimate hides is the cash position; the company ended Q3 2025 with $36.0 million in cash and a $25.0 million convertible notes payable balance, so liquidity is a near-term focus.

Mitigation and Strategic Opportunities

The company is not sitting still; they are actively mapping risks to clear actions. The most significant move is the $35.7 million strategic investment closed in early September 2025 from A-Premium, ZongTeng Group, and CDH Investments. This is a game-changer for supply chain and product range. The partnership with A-Premium, for example, is expected to add over 100,000 SKUs and is already generating about $20 million in annualized revenue, with potential to exceed $100 million as integration progresses.

• Mitigate tariffs by diversifying sourcing and negotiating vendor cost concessions.
• Drive efficiency with a restructuring plan expected to yield $10 million in annualized cost savings.
• Enhance logistics via ZongTeng Group, giving access to 50+ U.S. fulfillment facilities.

Management is confident in this path, maintaining a goal to be free cash flow positive in 2026. This is the long-term goal that all these short-term, painful operational adjustments are designed to achieve. For more on the long-term vision, you can review their Mission Statement, Vision, & Core Values of CarParts.com, Inc. (PRTS).

Growth Opportunities

You're looking for a clear path to profitability for CarParts.com, Inc. (PRTS), and the recent strategic pivot confirms the company is shifting its focus from top-line growth at all costs to disciplined, profitable execution. The key takeaway is that the $35.7 million strategic investment and new partnerships, finalized in September 2025, are the most significant near-term drivers for margin expansion and future free cash flow.

The market is still cautious, with full-year 2025 revenue estimates around $587.31 million and an expected Earnings Per Share (EPS) loss of about -$0.64 (consensus). But the real story is in the operational changes. The company is defintely prioritizing margin improvements over sales volume, which is why Q3 2025 revenue was down 12% year-over-year to $127.8 million-a direct result of rationalizing advertising spend to improve profitability. That's a necessary trade-off for a healthier business.

Here's the quick math on the strategic shift:

• Product Expansion: The partnership with A-Premium is a game-changer, allowing CarParts.com, Inc. (PRTS) to scale its mechanical private label assortment from 20,000 Stock Keeping Units (SKUs) to over 120,000 SKUs with zero capital outlay.
• Logistics Efficiency: ZongTeng Group provides a global logistics network, which should help mitigate the impact of high outbound freight costs and tariffs that have been squeezing gross margins.
• Capital Infusion: The $35.7 million investment from the three partners provides a much-needed financial cushion and validates the new strategy.

What this estimate hides is the potential for an accelerated path to profitability in 2026, which management is targeting for being free cash flow positive. The new partnerships directly address the core weaknesses of supply chain cost and product depth.

Key Growth Drivers and Competitive Edge

The company's competitive advantages are now centered on its technology and its vertically integrated model, which is being strengthened by the new strategic partners. You can see the full commitment to this customer-first approach, including the Mission Statement, Vision, & Core Values of CarParts.com, Inc. (PRTS).

The focus on digital engagement and high-margin services is also a clear driver. The mobile app, a direct communication channel, now has over 1 million users and accounts for 12% of e-commerce revenues, showing stronger customer loyalty. Plus, the CarParts+ membership program has surpassed 7,000 paid members, boosting high-margin fee income from services like product and shipping protection.

The table below summarizes the key growth drivers and their impact:

The company is also leveraging investments in machine learning-based search algorithms to improve fitment accuracy, which is a core competitive edge in the auto parts e-commerce space. This focus on a better customer experience, combined with the operating leverage from its vertically integrated supply chain, positions CarParts.com, Inc. (PRTS) to capture a more profitable share of the aftermarket. The goal is clear: drive sustained free cash flow by 2026 through disciplined execution and operational efficiency.