O'Reilly Automotive Inc (ORLY, Financial) has recently shown a daily loss of 1.22% and a three-month decline of 5.39%. With an Earnings Per Share (EPS) of 39.4, investors may wonder whether the stock is fairly valued. This article delves into the intrinsic valuation of O'Reilly Automotive, leveraging the proprietary GF Value to determine if the current market price reflects the true value of the company.
Company Overview
O'Reilly Automotive is a leading aftermarket automotive parts retailer in the United States and Mexico. With annual sales nearing $16 billion and over 6,000 stores, the company caters to both do-it-yourself customers and professional service providers. Despite a fragmented industry, O'Reilly Automotive distinguishes itself with exceptional customer service and a robust distribution network. Currently, the stock is trading at $1000.4, closely aligned with its GF Value of $1007.04, suggesting a fair valuation.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated using historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For O'Reilly Automotive, the GF Value suggests the stock is fairly priced. This assessment is based on the company's solid past performance and growth prospects. If the stock price significantly diverges from this GF Value, it might indicate overvaluation or undervaluation, affecting potential future returns.
Financial Strength and Stability
O'Reilly Automotive's financial strength is crucial for assessing the risk of capital loss. The company has a cash-to-debt ratio of 0.01, which is relatively low compared to its peers. This metric, alongside a fair financial strength rating of 5 out of 10, suggests that O'Reilly Automotive maintains a stable financial base but should be cautious about its debt levels.
Profitability and Growth Prospects
O'Reilly Automotive has demonstrated remarkable profitability, with a 10-year track record of earnings. The company's operating margin stands at 20.04%, significantly higher than most of its industry counterparts. With an average annual revenue growth rate of 18.5%, O'Reilly Automotive not only outpaces many competitors but also shows potential for sustained growth and value creation.
Investment Considerations: ROIC vs. WACC
Comparing the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) provides insights into O'Reilly Automotive's efficiency in generating returns on investments. With an ROIC of 27.3% versus a WACC of 7.82%, the company significantly exceeds its cost of capital, indicating effective management and profitable investment opportunities.
Conclusion
In conclusion, O'Reilly Automotive (ORLY, Financial) appears to be fairly valued at its current price, closely mirroring its GF Value. The company's robust financial health, strong profitability, and superior growth metrics suggest a stable investment. For a deeper analysis and more detailed financial data on O'Reilly Automotive, interested investors should consider viewing its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
