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Advance Auto Parts Inc AAP

Morningstar Rating
$65.76 −0.38 (0.57%)
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Company Report

Advance Auto Parts: Turnaround Story Intriguing, but Years of Operational Miscues Tough to Overcome

Despite serving as a leading auto parts retailer across North America, we do not think Advance Auto Parts benefits from a durable competitive edge and thus lacks confidence in its ability to outearn its cost of capital over the following decade. After suffering from operational mismanagement and poor supply chain integration, the retailer is set to embark on its third turnaround attempt in 15 years with Shane O’Kelly at the helm. While we look favorably upon management’s plans to cut unnecessary corporate costs and improve distribution speed, we find it increasingly difficult for the auto parts retailer to close the wide operational gap that exists between it and its most prodigious competitors, such as wide-moat firms AutoZone and O’Reilly, and narrow-moat Genuine Parts (Napa).

Price vs Fair Value

AAP is trading at a 612% premium.
Price
$65.76
Fair Value
$58.00
Uncertainty
High
1-Star Price
$57.10
5-Star Price
$42.70
Economic Moat
Lygf
Capital Allocation
Zvvf

Bulls Say, Bears Say

Bulls

Advance’s top line should benefit as its sales mix skews toward the professional end market, which is a faster growing channel than DIY.

Bears

Electrification of the vehicle fleet could stymie demand for aftermarket auto parts as EVs have fewer moving parts than vehicles with an internal combustion engine.

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News

Trading Information

Previous Close Price
$66.14
Day Range
$65.1567.03
52-Week Range
$47.7388.56
Bid/Ask
$65.51 / $66.00
Market Cap
$3.92 Bil
Volume/Avg
2.1 Mil / 1.6 Mil

Key Statistics

Price/Earnings (Normalized)
18.15
Price/Sales
0.35
Dividend Yield (Trailing)
1.52%
Dividend Yield (Forward)
1.52%
Total Yield
1.63%

Company Profile

Advance Auto Parts is a leading auto parts retailer in North America with over 5,000 store and branch locations. About 60% of the firm’s sales are geared toward the professional channel, with the remaining 40% going to the do-it-yourself market. Through its vast store footprint and distribution network, Advance manages thousands of stock-keeping units conducive to various vehicle makes and models. The retailer primarily competes on the basis of inventory availability and service speed, making the operating efficiency of its hub and spoke distribution model critical to meeting customer needs.
Sector
Consumer Cyclical
Industry
Specialty Retail
Stock Style Box
Small Value
Total Number of Employees
69,000

Competitors

Valuation

Metric
AAP
AZO
ORLY
Price/Earnings (Normalized)
18.1520.1127.46
Price/Book Value
1.53
Price/Sales
0.353.014.05
Price/Cash Flow
12.4216.9522.58
Price/Earnings
AAP
AZO
ORLY

Financial Strength

Metric
AAP
AZO
ORLY
Quick Ratio
0.240.090.08
Current Ratio
1.220.790.71
Interest Coverage
1.218.8615.11
Quick Ratio
AAP
AZO
ORLY

Profitability

Metric
AAP
AZO
ORLY
Return on Assets (Normalized)
16.56%17.66%
Return on Equity (Normalized)
Return on Invested Capital (Normalized)
44.88%44.24%
Return on Assets
AAP
AZO
ORLY
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Specialty Retail Industry Comparables

1-Day Chart
Name
Price
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
O'Reilly Automotive Inc
ORLY
DypjqzkhZshn$63.7 Bil
AutoZone Inc
AZO
FxckxslyhcQxk$51.1 Bil
Tractor Supply Co
TSCO
SmnyhpttlFhx$30.4 Bil
Williams-Sonoma Inc
WSM
TvypykyzGyc$19.5 Bil
Best Buy Co Inc
BBY
CgzwylxhxWqwchz$19.5 Bil
Dick's Sporting Goods Inc
DKS
QcztcqcfGkhm$18.7 Bil
Ulta Beauty Inc
ULTA
BsjlcggcjRbymgt$18.3 Bil
Bath & Body Works Inc
BBWI
PdrltwnvDflfkh$9.4 Bil
RH Class A
RH
YxpdklqxgWlwh$4.0 Bil

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