Despite a daily loss of 6.76% and a 3-month loss of 10.52%, the Earnings Per Share (EPS) (EPS) of Genuine Parts Co (GPC, Financial) stands at 8.55. This raises the question: is the stock modestly undervalued? To answer this, we delve into an analysis of the company's valuation. We invite you to follow our analysis for a deeper understanding of this matter.
Company Snapshot
Genuine Parts Co, with its market cap of $19.50 billion, is a leading player in the automotive parts and industrial components sector. Generating nearly two-thirds of its net sales from automotive parts, the company operates around 9,800 stores worldwide, most of which are independently owned. Its industrial unit, primarily operating under the Motion Industries banner in the United States, supplies a range of components to maintenance, repair, and original equipment manufacturer clients.
When comparing the current stock price of $138.68 to the GF Value of $169.3, it appears that Genuine Parts Co is modestly undervalued. This comparison sets the stage for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is an exclusive GuruFocus measure that estimates the intrinsic value of a stock. It considers historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair trading value of the stock.
According to our calculations, Genuine Parts Co appears to be modestly undervalued. The stock's future return is likely to be higher than its business growth due to its current undervaluation.
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Financial Strength Analysis
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Thus, it's crucial to carefully review a company's financial strength before deciding to buy its stock. Genuine Parts Co has a cash-to-debt ratio of 0.12, which is worse than 78.42% of 1103 companies in the Retail - Cyclical industry. However, GuruFocus ranks the overall financial strength of Genuine Parts Co at 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent long-term profitability, is typically less risky. Genuine Parts Co has been profitable 9 out of the past 10 years. Over the past twelve months, the company had a revenue of $22.90 billion and Earnings Per Share (EPS) of $8.55. Its operating margin is 7.17%, which ranks better than 68.28% of 1113 companies in the Retail - Cyclical industry. Overall, the profitability of Genuine Parts Co is ranked 7 out of 10, indicating fair profitability.
Growth is one of the most important factors in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Genuine Parts Co is 9.1%, which ranks better than 66.35% of 1049 companies in the Retail - Cyclical industry. The 3-year average EBITDA growth rate is 19.3%, which ranks better than 70.95% of 895 companies in the Retail - Cyclical industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Genuine Parts Co's ROIC was 11.92, while its WACC came in at 8.38.
Conclusion
Overall, the stock of Genuine Parts Co (GPC, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 70.95% of 895 companies in the Retail - Cyclical industry. To learn more about Genuine Parts Co stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
