Is Now An Opportune Moment To Examine Advance Auto Parts, Inc. (NYSE:AAP)?

Advance Auto Parts, Inc. (NYSE:AAP), is not the largest company out there, but it saw a significant share price rise of 23% in the past couple of months on the NYSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Advance Auto Parts’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Advance Auto Parts

What Is Advance Auto Parts Worth?

Great news for investors – Advance Auto Parts is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is $58.04, but it is currently trading at US$43.73 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Advance Auto Parts’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Advance Auto Parts look like?

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 more than double over the next couple of years, the future seems bright for Advance Auto Parts. 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? Since AAP is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on AAP for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AAP. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 3 warning signs for Advance Auto Parts (1 can't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Advance Auto Parts, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.