Critical Review: Advance Auto Parts (AAP) and Its Peers

Advance Auto Parts (NYSE:AAP) is one of 285 public companies in the “Specialty Retail” industry, but how does it contrast to its competitors? We will compare Advance Auto Parts to related businesses based on the strength of its dividends, analyst recommendations, valuation, institutional ownership, earnings, risk and profitability.

Analyst Recommendations

This is a summary of current ratings and price targets for Advance Auto Parts and its competitors, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Advance Auto Parts	3	15	3	0	2.00
Advance Auto Parts Competitors	3669	15592	21615	590	2.46

Advance Auto Parts presently has a consensus price target of $47.28, suggesting a potential upside of 3.52%. As a group, “Specialty Retail” companies have a potential upside of 7.37%. Given Advance Auto Parts’ competitors stronger consensus rating and higher probable upside, analysts plainly believe Advance Auto Parts has less favorable growth aspects than its competitors.

Profitability

This table compares Advance Auto Parts and its competitors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Advance Auto Parts	0.97%	9.84%	1.83%
Advance Auto Parts Competitors	-3.69%	-14.02%	3.17%

Dividends

Advance Auto Parts pays an annual dividend of $1.00 per share and has a dividend yield of 2.2%. Advance Auto Parts pays out 73.0% of its earnings in the form of a dividend. As a group, “Specialty Retail” companies pay a dividend yield of 2.1% and pay out 35.8% of their earnings in the form of a dividend. Advance Auto Parts has increased its dividend for 1 consecutive years.

Insider and Institutional Ownership

88.7% of Advance Auto Parts shares are held by institutional investors. Comparatively, 51.6% of shares of all “Specialty Retail” companies are held by institutional investors. 0.8% of Advance Auto Parts shares are held by company insiders. Comparatively, 20.5% of shares of all “Specialty Retail” companies are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Advance Auto Parts and its competitors gross revenue, earnings per share and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Advance Auto Parts	$8.60 billion	$44.00 million	33.34
Advance Auto Parts Competitors	$7.30 billion	$386.47 million	33.12

Advance Auto Parts has higher revenue, but lower earnings than its competitors. Advance Auto Parts is trading at a higher price-to-earnings ratio than its competitors, indicating that it is currently more expensive than other companies in its industry.

Risk & Volatility

Advance Auto Parts has a beta of 1.02, indicating that its share price is 2% more volatile than the S&P 500. Comparatively, Advance Auto Parts’ competitors have a beta of 1.91, indicating that their average share price is 91% more volatile than the S&P 500.

Summary

Advance Auto Parts competitors beat Advance Auto Parts on 9 of the 15 factors compared.

About Advance Auto Parts

Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts. It also offers air conditioning chemicals and accessories; air fresheners; antifreeze and washer fluids; electrical wires and fuses; electronics; floor mats, seat covers, and interior accessories; hand and specialty tools; lighting products; performance parts; sealants, adhesives, and compounds; tire repair accessories; vent shades, mirrors and exterior accessories; washes, waxes and cleaning supplies; and wiper blades. In addition, the company offers air filters; fuel and oil additives; fuel filters; grease and lubricants; motor oils; oil filters, part cleaners and treatments; and transmission fluids for engine maintenance. Further, it offers battery and wiper installation; engine light scanning and checking; electrical system testing, including batteries, starters, and alternators; oil and battery recycling; and loaner tool program services. Additionally, the company sells its products through its website. It serves professional installers and do-it-yourself customers. The company operates stores under the Advance Auto Parts and Carquest names, as well as branches under the Worldpac name. The company has stores in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and independently owned Carquest branded stores in Mexico and various Caribbean Islands. Advance Auto Parts, Inc. was founded in 1929 and is based in Raleigh, North Carolina.