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O'Reilly Automotive, Inc. (ORLY) Hits Fresh High: Is There Still Room to Run?

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Have you been paying attention to shares of O'Reilly Automotive (ORLY - Free Report) ? Shares have been on the move with the stock up 6.1% over the past month. The stock hit a new 52-week high of $1015.6 in the previous session. O'Reilly Automotive has gained 6.9% since the start of the year compared to the 27.3% move for the Zacks Retail-Wholesale sector and the 3.6% return for the Zacks Automotive - Retail and Wholesale - Parts industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 25, 2023, O'Reilly Automotive reported EPS of $10.72 versus consensus estimate of $10.36 while it beat the consensus revenue estimate by 3.29%.

For the current fiscal year, O'Reilly Automotive is expected to post earnings of $42.35 per share on $15.81 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $46.61 per share on $16.71 billion in revenues. This represents a year-over-year change of 10.83% and 5.67%, respectively.

Valuation Metrics

O'Reilly Automotive may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

O'Reilly Automotive has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 24X current fiscal year EPS estimates, which is a premium to the peer industry average of 23.8X. On a trailing cash flow basis, the stock currently trades at 25.1X versus its peer group's average of 15.4X. Additionally, the stock has a PEG ratio of 1.77. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, O'Reilly Automotive currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if O'Reilly Automotive fits the bill. Thus, it seems as though O'Reilly Automotive shares could have a bit more room to run in the near term.


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