Advance Auto Parts Inc. (AAP, Financial) Director Jeffrey C. Smith purchased 400,000 shares of the company’s stock at an average price of $155.68 on May 31. The $62 million transaction came after Smith made an initial purchase of 150,000 shares at an average price of $152.73 six days earlier.
Incorporated in Delaware August 2001, Advance Auto Parts specializes in automotive parts ranging from car batteries and other accessories to various aftermarket auto parts. The company currently has a financial strength of 8 out of 10, suggesting a healthy financial system and high chance of survival. With an Altman Z-score of 3.23, Advance Auto Parts is not likely to go bankrupt in the near future.
Compared to competing firms in the global specialty retail industry, Advance Auto Parts has a profitability and growth rating of 8 out of 10. The company has the lowest P/S ratio among its competition; furthermore, the current P/S ratio of 1.18, which is near one-year lows, is lower than 68% of all global specialty retail firms. Other valuation ratios are relatively low: the firm has P/E ratios near one-year lows and P/B ratios near five-year lows.
Two major rival firms of Advance Auto Parts have strong financial outlooks as well: O’Reilly Automotive Inc. (ORLY, Financial) and AutoZone Inc. (AZO, Financial). Both of these firms have a profitability and growth rating of 9 out of 10 despite having a lower financial strength rating than Advance Auto Parts. The above chart summarizes the five-year P/S ratios of the three companies. Throughout the five-year period, Advance Auto Parts had the lowest P/S ratio.
Advance Auto Parts had lower Altman Z-scores and Piotroski F-scores than its rivals during the past five years. Although this suggests that Advance Auto Parts has slightly weaker financials than its peers, Advance Auto Parts still has higher financial strength, probably because it has a higher equity-to-asset ratio.
Despite having higher equity-to-asset ratios over the past five years, O’Reilly had decreasing equity-to-asset ratios year over year. Currently, O’Reilly has a lower equity-to-asset ratio than Advance Auto Parts, suggesting that O’Reilly has higher long-term debt. In case the auto retail industry experiences a major downturn, O’Reilly has a slightly higher chance of going into bankrupt due to its higher leverage.
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