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O'Reilly Automotive Inc ORLY

Morningstar Rating
$1,081.75 +19.68 (1.85%)
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Company Report

O’Reilly: Robust Distribution and Growth Outlook Yields Increase to Fair Value Estimate, Wide Moat

After reviewing O’Reilly’s competitive standing, we are upgrading the firm’s moat rating to wide, from narrow, as we have more confidence in its ability to generate excess economic returns for 20 years. As demand for auto parts tends to be inelastic and time sensitive, we think O’Reilly boasts a unique ability to promptly serve its do-it-yourself and professional customer base due to its established hub-and-spoke supply chain model and strong supplier relationships that give the firm an edge as it pertains to local product availability. We further surmise that O’Reilly leverages its scale to negotiate favorable volume-based discounts with its suppliers, yielding a cost advantage. Taken with an aging vehicle fleet predominantly powered by internal combustion engines, we think O’Reilly is well positioned to benefit from strong underlying demand for aftermarket auto parts while taking market share from its fragmented competitive set. As such, we raised our fair value estimate on O’Reilly by about 8% to $780 per share, from $720 previously, due to the moat upgrade and an increase in our comparable-sales-growth forecast to 3.5%-4.0%, from an average of about 3.0% prior. Still, shares trade at about a 30% premium to our fair value estimate.

Price vs Fair Value

ORLY is trading at a 39% premium.
Price
$1,081.76
Fair Value
$981.00
Uncertainty
Medium
1-Star Price
$2,748.00
5-Star Price
$993.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

O’Reilly’s distribution network and supplier relationships are difficult to replicate and give the firm a durable edge as it pertains to product availability.

Bears

Competing online channels often have less expense overhead than pure-play auto parts retailers and thus may be able to price items below O’Reilly.

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News

Trading Information

Previous Close Price
$1,062.07
Day Range
$1,058.841,083.57
52-Week Range
$795.751,083.57
Bid/Ask
$1,057.51 / $1,082.55
Market Cap
$63.90 Bil
Volume/Avg
354,778 / 409,371

Key Statistics

Price/Earnings (Normalized)
28.51
Price/Sales
4.17
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
4.79%

Company Profile

O’Reilly is an aftermarket automotive parts retailer in the United States and Mexico with nearly $16 billion in annual sales. The company operates over 6,000 domestic stores and serves both the do-it-yourself (about 55% of sales) and professional (45% of sales) end markets. Despite operating amid a highly fragmented industry, O’Reilly differentiates itself by providing quality service to its customers throughout the entirety of the vehicle diagnosis and purchasing process. Furthermore, the firm boasts an impressive hub-and-spoke distribution network designed to provide its localized store base with ample aftermarket product availability across various vehicle makes and models.
Sector
Consumer Cyclical
Industry
Specialty Retail
Stock Style Box
Large Growth
Total Number of Employees
87,745

Competitors

Valuation

Metric
ORLY
AZO
GPC
Price/Earnings (Normalized)
28.5121.4516.51
Price/Book Value
4.77
Price/Sales
4.173.140.92
Price/Cash Flow
23.2517.7512.31
Price/Earnings
ORLY
AZO
GPC

Financial Strength

Metric
ORLY
AZO
GPC
Quick Ratio
0.080.090.42
Current Ratio
0.690.791.23
Interest Coverage
16.8310.2228.03
Quick Ratio
ORLY
AZO
GPC

Profitability

Metric
ORLY
AZO
GPC
Return on Assets (Normalized)
18.14%16.89%7.71%
Return on Equity (Normalized)
32.31%
Return on Invested Capital (Normalized)
45.28%47.36%16.16%
Return on Assets
ORLY
AZO
GPC
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GPC
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BBY
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