O’Reilly Automotive (NASDAQ: ORLY) and Advance Auto Parts (NYSE:AAP) are both mid-cap retail/wholesale companies, but which is the superior stock? We will compare the two businesses based on the strength of their valuation, institutional ownership, earnings, risk, profitabiliy, analyst recommendations and dividends.

Volatility & Risk

O’Reilly Automotive has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500. Comparatively, Advance Auto Parts has a beta of 0.89, meaning that its stock price is 11% less volatile than the S&P 500.

Earnings & Valuation

This table compares O’Reilly Automotive and Advance Auto Parts’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
O’Reilly Automotive $8.65 billion 1.95 $1.91 billion $10.97 16.91
Advance Auto Parts $9.48 billion 0.79 $1.01 billion $5.51 18.46

O’Reilly Automotive has higher revenue, but lower earnings than Advance Auto Parts. O’Reilly Automotive is trading at a lower price-to-earnings ratio than Advance Auto Parts, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

91.6% of O’Reilly Automotive shares are held by institutional investors. 3.1% of O’Reilly Automotive shares are held by insiders. Comparatively, 4.5% of Advance Auto Parts shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares O’Reilly Automotive and Advance Auto Parts’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
O’Reilly Automotive 12.10% 61.79% 14.08%
Advance Auto Parts 4.31% 16.02% 5.51%

Analyst Recommendations

This is a summary of recent ratings and price targets for O’Reilly Automotive and Advance Auto Parts, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
O’Reilly Automotive 0 11 7 1 2.47
Advance Auto Parts 3 6 12 1 2.50

O’Reilly Automotive currently has a consensus price target of $254.00, indicating a potential upside of 36.93%. Advance Auto Parts has a consensus price target of $147.20, indicating a potential upside of 44.68%. Given Advance Auto Parts’ stronger consensus rating and higher possible upside, analysts plainly believe Advance Auto Parts is more favorable than O’Reilly Automotive.

Dividends

Advance Auto Parts pays an annual dividend of $0.24 per share and has a dividend yield of 0.2%. O’Reilly Automotive does not pay a dividend. Advance Auto Parts pays out 4.4% of its earnings in the form of a dividend.

About O’Reilly Automotive

O’Reilly Automotive, Inc. is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The Company sells its products to both do-it-yourself (DIY) and professional service provider customers. The Company’s product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products, and accessories, such as floor mats, seat covers and truck accessories. The Company’s stores offer various services and programs to its customers, such as used oil, oil filter and battery recycling; battery diagnostic testing; electrical and module testing; check engine light code extraction; loaner tool program; custom hydraulic hoses, and machine shops.

About Advance Auto Parts

Advance Auto Parts, Inc. provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. It serves through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, it operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, its Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names.

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