Stock Analysis

O'Reilly Automotive (NASDAQ:ORLY) shareholders have earned a 29% CAGR over the last five years

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NasdaqGS:ORLY
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of O'Reilly Automotive, Inc. (NASDAQ:ORLY) stock is up an impressive 258% over the last five years. On top of that, the share price is up 11% in about a quarter.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

However if you'd rather see where the opportunities and risks are within ORLY's industry, you can check out our analysis on the US Specialty Retail industry.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, O'Reilly Automotive managed to grow its earnings per share at 24% a year. So the EPS growth rate is rather close to the annualized share price gain of 29% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
NasdaqGS:ORLY Earnings Per Share Growth September 6th 2022

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's good to see that O'Reilly Automotive has rewarded shareholders with a total shareholder return of 20% in the last twelve months. Having said that, the five-year TSR of 29% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for O'Reilly Automotive (1 is concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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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About NasdaqGS:ORLY

O'Reilly Automotive

O'Reilly Automotive, Inc., together with its subsidiaries, operates as a retailer and supplier of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation0
Future Growth1
Past Performance3
Financial Health2
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Acceptable track record with imperfect balance sheet.