Investors have done well on the Nasdaq Composite in the recent decade. The tech-heavy benchmark returned 310%, including dividends. A retail stock in the index has outperformed. Talking about O'Reilly Automotive (NASDAQ: ORLY). Since February 27, 2014, shares of the aftermarket auto parts company have risen 619%, turning a $10,000 investment into $71,880. Should you buy this amazing stock now?
Investors are focused on high-flying tech businesses with AI exposure. O'Reilly's boring business approach shouldn't be overshadowed by excitement. This corporation distributes brakes, motor oil, and wiper blades to DIY and professional technicians at 6,095 U.S. locations. O'Reilly has a history of good basic performance, despite its anonymity.
Revenue and diluted EPS rose 10.6% and 19% year between 2018 and 2023. Even more striking is O'Reilly's 14% revenue growth and 26% net income growth in 2020 despite the coronavirus pandemic.
The company generated $2 billion in free cash flow last year. Management buys back plenty of stock after reinvesting in growth initiatives like new stores or distribution. Over the past decade, outstanding shares have dropped 46%.
O'Reilly competes with many smaller, independent shops in a fragmented industry. Having enough inventory is crucial since buyers feel rushed to find the necessary parts for their autos. O'Reilly's scale can eventually help it acquire market share by attracting new clients
Besides its competitiveness and development potential, O'Reilly is recession-proof. The company's same-store sales grew for the 31st year in a row. This constancy shows how durable the company is. People drive more when the economy is well, consumer spending is high, and interest rates are low. This increases vehicle wear and tear, boosting O'Reilly's sales.
However, in uncertain or recessionary times, like the current economic situation, people will delay buying new cars. With current interest rates, this is possible. This situation will boost O'Reilly demand as consumers invest in extending their autos' lifespans.
This company's investors don't have to worry about the economy. Instead, you may rest assured the company will succeed regardless of the macro environment.
Investors are paying a 28.4 P/E due to the stock's strong performance. This is far higher than the S&P 500's P/E multiple of 23 and the stock's trailing-10-year average of 22.9. One can justify this fee for a great business. It's also possible that the valuation is a touch high. Dollar-cost averaging over several months may be optimal.
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