Over the past six months, O'Reilly’s stock price fell to $89.19. Shareholders have lost 12.3% of their capital, which is disappointing considering the S&P 500 has climbed by 9.8%. This may have investors wondering how to approach the situation.
Following the drawdown, is this a buying opportunity for ORLY? Find out in our full research report, it’s free.
Why Is ORLY a Good Business?
Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ: ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.
1. Surging Same-Store Sales Show Increasing Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
O'Reilly’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 4.4% per year.
2. Operating Margin Reveals a Well-Run Organization
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
O'Reilly’s operating margin has generally stayed the same over the last 12 months, averaging 19.4% over the last two years. This profitability was elite for a consumer retail business thanks to its efficient cost structure and economies of scale. This result isn’t surprising as its high gross margin gives it a favorable starting point.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
O'Reilly’s five-year average ROIC was 42.4%, placing it among the best consumer retail companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons why O'Reilly ranks highly on our list. After the recent drawdown, the stock trades at 26.9× forward P/E (or $89.19 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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