Stock (Symbol) |
O’Reilly Automotive (ORLY) |
Stock Price |
$235 |
Sector |
| Food & Necessities |
Data is as of |
| January 10, 2016 |
Expected to Report |
| Feb 10 |
Company Description |
 O’Reilly Automotive, Inc. (O’Reilly) is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company’s stores carry a product line, including new and remanufactured automotive hard parts, maintenance items and various automotive accessories. As of December 31, 2014, the Company owned and operated 4,366 stores in 43 states, servicing both the do-it-yourself (DIY) customers and the professional service providers. O’Reilly’s stores offer new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. Source: Thomson Financial |
Sharek’s Take |
 O’Reilly Automotive has been clicking on all cylinders for years, as the stock continued to hit new highs. For while the stock sold for a premium price, but now with the market correction (crash) ORLY is undervalued for the first time in a long time. ORLY has been delivering +20% profit growth via (1) increasing store count by 5% a year (2) same store sales growth of 5% or more the past 8 qtrs, including a sparking 8% last qtr and (3) buying back shares. ORLY’s share count fell from 140 million to 100 million from 2011-2014 as management bought back stock with excess cash. It spent $274 million buying back stock just last qtr, up from $220m 2qtrs ago. Also, ORLY’s beaten the street every quarter since Fall 2011 and even then it still hit estimates. Low gas prices are good for drivers: More miles mean more auto parts. Looking further out, ORLY expects to grow its store count by 40% in the US and expand into Canada and Mexico. It sometimes expands my acquiring other chains, then going into the stores to improve sales and profit margins. This is one of the finest stocks out there. Solid growth with above average safety. ORLY is in the Growth Portfolio and I will add it to the Conservative Portfolio. ORLY has 15% and 30% upside to my 2016 and 2017 Fair Values. |
One Year Chart |
 ORLY’s P/E has fallen from 29 to 23 since last qtr, and has gone from overvalued to undervalued. Last qtr sales increased 11% and profits 23%. Profits growing faster than sales is a sign of an efficient company. ORLY beat the street by 14 cents for the 2nd straight qtr, and has beaten handily the last 6 qtrs. Annual profit estimates have increased each qtr for years. I fully expect ORLY to beat this qtr and continue its 20% profit growth. |
Fair Value |
 ORLY was a little undervalued after the 2008-2009 Bear Market when it was growing +20% and had a P/E in the high-teens. Then during 2014-2015 the stock’s rise took the P/E into the high-20s. Now the stock sells for 23x earnings after posting 23% profit growth. My Fair Value is 26x profits, or $270 a share this year and $306 next year. |
Bottom Line |
O’Reilly Automotive continues to click on all cylinders and this sock market correction has taken the stock down to the point its a value again. During the past ten years profits have grown 20% a year as the stock’s climbed 22%. Management is sound, and grows through a combination of expansion, acquisitions and stock buybacks. ORLY ranks 24th of 37 stocks in the Growth Portfolio Power Rankings. I will add the stock to the Conservative Portfolio where it will rank 9th of 35 stocks in the Power Rankings. |
Power Rankings |
Growth Stock Portfolio
24 of 37Aggressive Growth Portfolio N/AConservative Stock Portfolio 9 of 35 |
