O'Reilly Automotive Inc (ORLY, Financial) has recently shown a daily gain of 0.94%, complemented by a 3-month gain of 4.49%. With an impressive Earnings Per Share (EPS) of $37.59, investors are keen to understand if the stock is trading at a fair valuation. This analysis aims to delve into the intrinsic value of O'Reilly Automotive, providing a clear picture of its current market position and future prospects.
Before we dive into the valuation specifics, let's establish a foundational understanding of O'Reilly Automotive's operations. With a market cap of $56.20 billion and sales of $15.60 billion, the company stands as one of the largest sellers of aftermarket automotive parts. But how does this translate into value for investors? By comparing the stock price of $950.08 to the GF Value of $939.87, we can begin to unpack whether O'Reilly Automotive is currently an attractive investment opportunity.
Summarizing the GF Value of O'Reilly Automotive (ORLY, Financial)
The GF Value is a proprietary metric that calculates the intrinsic value of a stock, considering historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If O'Reilly Automotive's stock price significantly deviates from the GF Value Line, it may indicate that the stock is either overvalued or undervalued, potentially affecting future returns. At the current price of $950.08 per share, O'Reilly Automotive seems to be fairly valued, suggesting that the long-term return of its stock could align closely with the rate of its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength of O'Reilly Automotive
The financial strength of a company is a critical indicator of its ability to withstand economic downturns and capitalize on growth opportunities. O'Reilly Automotive's cash-to-debt ratio of 0.01, while lower than many of its industry peers, still reflects a fair level of financial stability, with a GuruFocus financial strength rank of 5 out of 10.
Profitability and Growth Prospects
A company's profitability and growth are often seen as predictors of its long-term success. O'Reilly Automotive has maintained profitability for the past decade, boasting revenues of $15.60 billion and an operating margin that outperforms 94.5% of its competitors. This strong profitability, coupled with a 3-year average annual revenue growth of 19.3%, positions O'Reilly Automotive favorably within the Retail - Cyclical industry.
The Significance of ROIC vs. WACC
Analyzing the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) provides further insight into O'Reilly Automotive's efficiency at generating returns. With an ROIC of 28.09% against a WACC of 7.49%, the company demonstrates a strong ability to create value for shareholders.
Conclusion
In conclusion, O'Reilly Automotive (ORLY, Financial) presents itself as a fairly valued investment based on its current market price. The company exhibits a solid financial foundation and robust profitability, with growth rates surpassing many within its industry. For a more detailed exploration of O'Reilly Automotive's financials, interested investors can view the company's 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.
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.
