Should You Think About Buying Genuine Parts Company (NYSE:GPC) Now?

By
Simply Wall St
Published
December 23, 2021
NYSE:GPC
Source: Shutterstock

Genuine Parts Company (NYSE:GPC) saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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. However, could the stock still be trading at a relatively cheap price? Let’s examine Genuine Parts’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Genuine Parts

What is Genuine Parts worth?

According to my valuation model, Genuine Parts seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Genuine Parts today, you’d be paying a fair price for it. And if you believe that the stock is really worth $151.18, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Genuine Parts’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Genuine Parts?

earnings-and-revenue-growth
NYSE:GPC Earnings and Revenue Growth December 23rd 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 42% over the next couple of years, the future seems bright for Genuine 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? It seems like the market has already priced in GPC’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on GPC, now may not be the most optimal 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Genuine Parts.

If you are no longer interested in Genuine 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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