![]() The company retails various brand name, original equipment manufacturer (OEM) and private label 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 also serves 1,250 independently owned Carquest-branded stores in the U.S., Mexico, The Bahamas, Turks and Caicos, and British Virgin Islands. As of 2019, Advance operated 4,912 stores and 150 Worldpac branches in the United States and Canada. Headquartered in Raleigh, North Carolina, it serves both professional installer and do it yourself (DIY) customers. is an American automotive aftermarket parts provider. and Advance Auto Parts wasn't one of them! That's right - they think these 10 stocks are even better buys.Advance Auto Parts, Inc. They just revealed what they believe are the ten best stocks for investors to buy right now. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* When our analyst team has a stock tip, it can pay to listen. The good news is that these numbers can be ascertained by retail investors using publicly available information.ġ0 stocks we like better than Advance Auto Parts There is a value case to be made for the stock, but based on the above, it's not a strong one for long-term investors until management can provide hard evidence of improving the metrics above. But until there's tangible proof of improvement on the metrics discussed above, then the stock is unattractive. CEO Tom Greco is retiring at the end of the year, and whoever replaces him will undoubtedly have the plan to turn these metrics around. The warning signs were there.Īll of this is not to be too negative on the prospects for the company because there's still a value opportunity. And those issues existed even when the stock price was closer to $240 (in early 2022) than the $68 it currently trades on. The point of looking at these metrics is to highlight that these were precisely the metrics Starboard hoped would improve and those that the company's progress would be judged on. This is an Advance Auto Parts problem, not an industry one.ĭata by YCharts. Over the same period, O'Reilly's stock is up 60%, and AutoZone is up 59%. It's a move that proved prescient as Advance's stock is down a whopping 67% since the start of May 2021. In the end, Starboard exited its position in May 2021. TTM = trailing 12 months.Īnd, of course, Advance's operating margin consistently lagged its peers. Again, this would generate relatively more cash up front, which could be used to run the business better - say, in making more products more readily available, particularly for the DIFM market.ĭata by YCharts. More working capital improvements were supposed to come by lowering its receivables turnover ratio, meaning Advance Auto Parts would do a better job of collecting receivables from its customers in other words, collecting money from sales made to clients. ![]() Or at least it didn't reach anything near the standards of its peers, and Advance continues to be the laggard.ĭata by YCharts. Improving the ratio would free up valuable cash to use elsewhere in business operations. A higher number is better because it implies Advance would hold on to cash relatively longer. Improving accounts payableĪt the same time, Advance would improve its working capital usage (the money tied up in the business) by increasing its accounts payable over inventory ratio - meaning taking relatively longer to pay its suppliers for inventory. Unfortunately, Advance's management failed to reduce it significantly over the years, and it's still far higher than its rivals' numbers.ĭata by YCharts. The chart below shows how many days on average it takes each company to clear its inventory, so a lower number is better. It would also improve Advance's position in the DIFM market, leading to higher growth and margin expansion. Better inventory management would reduce days of inventory outstanding - that is, the number of days a company holds its inventory before selling it. This is a crucial issue in the industry, as consumers - and professionals in particular - often require a part immediately. In improving its business to the level of its peers, Advance would generate significant value for investors and satisfy its customers by enhancing its inventory and supply chain management. Moreover, Advance's exposure to the faster-growing do-it-for-me (DIFM) market meant it had a natural growth opportunity. Advance's margins and sales growth significantly lagged behind its two prominent peers, AutoZone and O'Reilly Automotive, and there was an opportunity to close the gap. Starboard's case was powerful and relied on a well-known value-based approach.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |