Stock Analysis

Is O'Reilly Automotive, Inc. (NASDAQ:ORLY) Potentially Undervalued?

NasdaqGS:ORLY
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Today we're going to take a look at the well-established O'Reilly Automotive, Inc. (NASDAQ:ORLY). The company's stock led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at O'Reilly Automotive’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for O'Reilly Automotive

What's The Opportunity In O'Reilly Automotive?

According to my valuation model, O'Reilly Automotive seems to be fairly priced at around 16.40% above my intrinsic value, which means if you buy O'Reilly Automotive today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $736.41, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, O'Reilly Automotive’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will O'Reilly Automotive generate?

earnings-and-revenue-growth
NasdaqGS:ORLY Earnings and Revenue Growth December 2nd 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 14% over the next couple of years, the outlook is positive for O'Reilly Automotive. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ORLY’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ORLY, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with O'Reilly Automotive (including 1 which can't be ignored).

If you are no longer interested in O'Reilly Automotive, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Valuation is complex, but we're helping make it simple.

Find out whether O'Reilly Automotive is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.