Glenhill Advisors Owns 5% of The Pep Boys – Manny, Moe & Jack (PBY)

Advance Auto Parts and AutoZone, meanwhile, carry trailing P/Es in the 16-17 range. In each case, the sell-side is forecasting something of an increase in earnings per share over the next year and a half with the result being that each’s valuation comes out to 14 times forward earnings estimates. Both of these companies also grew their revenue slightly in their most recent quarterly report compared to the same period in the previous fiscal year. In AutoZone’s case, this was accompanied by growth on the bottom line as well, though perhaps not as much as we would like at its current valuation. We’d also note that AutoZone features a beta of 0.2, meaning it is quite insulated from market conditions. Advance wasn’t able to grow its earnings going by its most recent report, despite the increase in sales at that company, and given that its valuation is dependent on future increases in net income we would avoid it.

Auto parts stores don’t seem to be doing too well in general, and Pep Boys appears to be the modest dependent of the group on improving its business over the next several years in the sense that its earnings multiples are quite high relative to its peers. We don’t see what Glenhill is looking for in the company, and in fact the other stocks we looked at don’t seem to have a good mix of valuation and financial performance either.

Disclosure: I own no shares of any stocks mentioned in this article.