Advance Auto Parts, Inc. (NYSE:AAP)
The Company primarily operates within the United States automotive aftermarket industry, which includes replacement parts, accessories, maintenance items, batteries and automotive chemicals for cars and light trucks.
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Advance has been a perennial underperformer for no good reason. Relatively new management is finally focused on becoming a better operator -- the company is focused on cutting costs and building the infrastructure to compete better in the commercial market. As the fourth largest player in a highly fragmented market, AAP could could be acquired by a larger player or simply keep growing at the expense of smaller competitors.
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Chart is not strong, volatile big swings.
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I believe more people will buy used cars and naturely will need parts fr om different sources
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Buyout possibilities
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Profitability looks fantastic: 5 yr avg ROIC is 19%, 5 yr avg ROE is 27% (ROE has been at least 22% every year for past 9 yrs) and both metrics averages has been rising consistently over the past decade.
Growth looks robust. EPS has grown EVERY SINGLE year for the past decade. 5yr EPS growth rate 18%, 3 yr EPS growth rate 26%. Consensus estimated EPS growth per yr for the next 5 years is 12.6%. Book value per share, operating cash flow per share, and free cash flow per share have seen tremendous growth over the past decade to the tune of over 13% compounded annually over the past 10 years.
Buyback alert! The share count has dropped over 7% PER YEAR for the past 4 years.
Valuations are low across the board and well below AAP’s historic averages: 10x FCF, PE of 12.9, EV/EBIT 7.4. Also debt/equity 0.6.
However, AAP dosen't seem to have a significant moat/durable competitive advantage compared to the competion. There also could be headwinds due to pent up demand for new cars. On the plus side, AAP only has 10% of its stores west of the Mississippi. It’s appears to have PLENTY of room for growth.
Conclusion: While AAP does not have a durable competitive advantage, it does appear to be a very well run, robustly growing, shareholder friendly business at a very cheap price relative to it future earnings potential. I believe it will outperform.
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Sector call on DIY auto part retailers dealing in after market parts. I'm expecting the sector to underperform expectations in the near term as the fleet age adjusts from abnormally long replacement cycles to more "normative" historical patterns.
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growing great, will rebound, i bought 69 shares this morning
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autowhitetridmic
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AAP has strategies in place to gain market share and solidify their position in the industry.
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New high list dictates all educated investing.
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Trucking up while everyone else is down
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Trading well below fair value.
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The ROE has been slightly higher than 20% for the past five years. They have more than 3000 stores in 40 states. There is still room for expansion, if you ask us.
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Advance Auto Parts, Inc. (AAP) will continue to do well amid record unemployment, and consumer credit pains. Demand for auto parts will only increase.
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It's all about the economy and familys economizing. That is, not buying new cars that they might have in a more stable economy.
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This is the only place I get my auto parts. Great company and knowledgeable workers.
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Should be excellent this year - fewer new car purchases means more used car parts bought.
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With consumers trying to strech their dollars further, they are keeping cars longer and fixing them themselves or having skilled friends or relative fix them using parts from stores like Advanced Auto Parts.
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