O’Reilly Automotive vs. Advance Auto Parts

The auto parts industry witnessed a significant downtrend amid the pandemic. Moreover, automakers had to cut production due to supply chain disruptions. However, according to IHS Markit, U.S. new-car sales in 2022 are expected to rise significantly from the last year. With improving supply lines and production, auto parts manufacturing companies should benefit.

On the other hand, the new vehicle shortage drove the demand for used vehicles higher, increasing the need for auto parts for repairs. Analysts expect the auto parts and accessories market to grow at a CAGR of 2.8% from 2022 to 2027. In addition, according to Statista, motor vehicle parts stores and dealers garnered revenue of almost $1.53 trillion from retail trade in 2021. Therefore, both O’Reilly Automotive and Advance Auto Parts (AAP) should benefit.

ORLY is a retailer and supplier of automotive aftermarket parts, tools, supplies, equipment, and accessories- which owns and operates around 5,759 stores in the United States. AAP provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy-duty trucks.

ORLY has gained 13.3% over the past year, while AAP has lost 5.5%. ORLY has lost 14.1% over the past month, compare with AAP’s 17.5% decline. Also, in terms of year-to-date performance, ORLY is the clear winner with a 13.9% loss versus AAP’s 24.9% decline. But which stock is a better buy now? Let’s find out.

Latest Developments

On April 27, 2022, Greg Johnson, ORLY’s President and CEO, said, “We continue to be pleased with the core, underlying strength of our business and our solid first-quarter comparable store sales results, which, on top of last year’s performance, are clear indicators of our Team’s ability to grow our business and take market share.”

On May 23, 2022, AAP announced the introduction of its DieHard® EV with xEV by Clarios, thus becoming the first auto parts retailer to sell 12-volt batteries for hybrid and EVs. This is a landmark achievement for the company and is expected to churn in solid returns in the near term. Moreover, on April 20, 2022, AAP and the Los Angeles Dodgers announced their exclusive agreement, which is expected to help AAP better expand its market across California and LA.

Recent Financial Results

ORLY’s sales increased 6.6% year-over-year to $3.30 billion in the first quarter ended March 31, 2022. Its gross profit came in at $1.71 billion, up 4.1% year-over-year, while its EPS also increased marginally year-over-year to $7.17.

AAP’s net sales increased marginally year-over-year to $3.37 billion for the period ended April 23, 2022. Its gross profit also increased marginally to $1.51 billion. However, the company’s EPS came in at $2.26, down 19.6% year-over-year.

Past and Expected Financial Performance

ORLY’s revenue and EPS grew at a CAGR of 11.9% and 23.6%, respectively, over the past three years. Analysts expect ORLY’s revenue to increase 14.9% in the current quarter, 7.4% in the current year, and 5.5% in the next year. The company’s EPS is expected to grow 7.8% in the current quarter, 6% in the current year, and 11.4% next year. Moreover, its EPS is expected to grow at 9.9% per annum over the next five years.

On the other hand, AAP’s revenue grew at a CAGR of 4.7% over the past three years. Analysts expect the company’s revenue to increase 4.3% in the current quarter, 3.5% in the current year, and 3.8% in the next year. The company’s EPS is expected to grow 12.9% in the current quarter, 13.7% in the current year, and 12.9% next year. Moreover, AAP’s EPS is expected to grow at 15.3% per annum over the next five years.


ORLY is more profitable, with a gross profit margin of 52.37%, compared to AAP’s 44.84%. ORLY’s net income margin of 15.85% is higher than AAP’s 5.6%. Also, ORLY’s EBIT margin and EBITDA margin of 21.49% and 23.94% compare with AAP’s 8.20% and 10.56%, respectively. Furthermore, ORLY’s ROTC of 30.96% compares with AAP’s 8.03%.

Thus, ORLY is more profitable here.


In terms of forward EV/Sales, ORLY is currently trading at 3.05x, significantly higher than AAP’s 1.26x. Also, ORLY’s forward EV/EBITDA of 13.19x is 24.7% higher than AAP’s 9.93x.

Thus, AAP is the more affordable option between the two stocks.

POWR Ratings

While ORLY has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, AAP has an overall C grade, equating to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

ORLY has an A grade for Quality, consistent with its higher-than-industry profit margins. ORLY’s trailing-twelve-month gross profit margin of 52.37% is 45.8% higher than the industry average of 35.91%. On the other hand, AAP has a Quality grade of B, consistent with its trailing-12-month gross profit margin of 44.84%, which is 24.9% higher than the industry average.

Both ORLY and AAP have a C grade for Stability, in sync with their 60-month beta of 1.04 and 1.23, respectively.

Of the 69 stocks in the Auto Parts industry, ORLY is ranked #15 while AAP is ranked #21.

Beyond what we’ve stated above, we have also rated both the stocks for Growth, Value, Momentum, and Sentiment. Click here to view ORLY ratings.  Get all AAP ratings here.

The Winner

The improving supply chain and expected robust auto sales this year should bode well for ORLY and AAP. However, ORLY’s higher profit margins and growth prospects make it the better buy here.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto Parts industry here.

ORLY shares were trading at $615.79 per share on Wednesday afternoon, up $7.61 (+1.25%). Year-to-date, ORLY has declined -12.81%, versus a -16.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More…

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