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Advance Auto Parts Inc AAP

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Morningstar’s Analysis

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Advance Auto Parts Maintaining Momentum as Pandemic, Recovery Unfold; Shares Trade Fairly

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $207 fair value estimate for narrow-moat Advance Auto Parts should rise by a mid-single-digit percentage to reflect solid second-quarter results. As expected, Advance saw rebounding professional segment sales (double-digit growth) as American life started to normalize, but we are encouraged that its do-it-yourself operation held fairly steady. The quarterly results do not alter our long-term perspective (3%-4% top-line growth, low-double-digit operating margin over the next decade), and while we have long held a favorable view of Advance’s ongoing turnaround, we suggest investors await a more attractive entry point.

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Company Profile

Business Description

Advance Auto Parts is one of the industry’s largest retailers of aftermarket automotive parts, tools, and accessories to do-it-yourself customers in North America. Advance operated 4,976 stores as of the end of 2020, in addition to servicing 1,277 independently owned Carquest stores. The company’s Worldpac unit is a premier distributor of imported original-equipment parts. Advance derived 57% of its 2020 sales from commercial clients, up from 30%-40% before the General Parts deal.

2635 East Millbrook Road
Raleigh, NC, 27604
T +1 540 362-4911
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 28, 2020
Stock Type Cyclical
Employees 68,000