Advance Auto Parts, Inc. (AAP), O’Reilly Automotive Inc (ORLY), AutoZone, Inc. (AZO): This Auto-Parts Retailer Might Be a Good Investment

All these developments can lead to a better performance in the future as Advance Auto’s commercial sales increase further. In addition, the do-it-yourself segment is also expected to gradually pick up on the back of more store openings and supply chain investments. Given these expected improvements and the reasonable valuation, Advance Auto looks like a good pick for conservative investors over the long run.

But investors should keep a close watch on the progress of the commercial program as Advance Auto could face competition from AutoZone, Inc. (NYSE:AZO) in this market. AutoZone, Inc. (NYSE:AZO), the largest auto-parts retailer in the U.S., runs a commercial program in 68% of its stores — a substantial number considering it operates around 5,100 stores, while Advance Auto opened its 4,000^th store recently.

In addition, AutoZone, Inc. (NYSE:AZO) plans to open 300 stores in the current fiscal year as it looks to increase its lead further over peers.

Considering O’Reilly Automotive Inc (NASDAQ:ORLY)
For those who are looking for a more aggressive play in the auto-parts industry and are unfazed by a rich valuation, O’Reilly Automotive Inc (NASDAQ:ORLY) might prove to be a good pick. O’Reilly Automotive Inc (NASDAQ:ORLY)’s comp growth has been phenomenal of late. Same-store sales had jumped 6.5% in the previous quarter, way better than the 2.5% in the year-ago period and ahead of its own estimate of 4% to 6%.

O’Reilly Automotive Inc (NASDAQ:ORLY) has also been expanding its network and had acquired 56 stores of VIP Parts, Tires & Service last year. In addition, the company is rolling out a loyalty program that proved to be a success in the pilot phase and believes that this program will help it capture more do-it-yourself customers. As mentioned earlier, the company trades at 23 times earnings, but the multiple comes down to a more reasonable 18.6 on a forward basis.

The bottom line
Advance Auto is not a stock that will appreciate rapidly; however, it can provide stability to a portfolio. An increase in the average age of vehicles and consumers remaining under pressure due to reasons stated above should lead to more spending on repairs and maintenance going forward, while growth in the commercial market is another tailwind for the company.

The article This Auto-Parts Retailer Might Be a Good Investment originally appeared on Fool.com is written by Harsh Chauhan.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of O’Reilly Automotive.

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