O'Reilly Auto Parts
ORLY
$86.05
-0.23%
O'Reilly Automotive, Inc. is a leading specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories, serving both do-it-yourself (DIY) and professional customers across nearly 6,600 stores in the U.S., Puerto Rico, Mexico, and Canada. The company's dual-market strategy, with a balanced revenue mix of approximately 49% from retail DIY and 49% from professional service orders, distinguishes it as a dominant player in the automotive aftermarket industry. Recent attention has focused on O'Reilly's potential acquisition of Genuine Parts' Napa distribution business, which could reshape the competitive landscape, while the stock has faced pressure from short-term margin concerns despite robust sales growth and market share gains.…
ORLY
O'Reilly Auto Parts
$86.05
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Investment Opinion: Should I buy ORLY Today?
Rating: Buy. O'Reilly Automotive offers a compelling risk/reward with 10.2% revenue growth, expanding margins, and a consensus analyst target implying 33.3% upside. The defensive business model and strong cash generation support a premium valuation, but the current price near the 52-week low provides an attractive entry point.
Supporting Evidence: The trailing PE of 30.6x is above the industry average of 22x, but the forward PE of 22.9x is more reasonable if earnings grow as expected. Revenue growth of 10.2% YoY and operating margin expansion to 18.5% demonstrate operational strength. Free cash flow of $788 million in Q1 2026 supports aggressive buybacks. The analyst average target of $110.25 provides a clear upside catalyst.
Risks & Conditions: The biggest risks are acquisition integration, margin compression, and premium valuation. This Buy rating would be downgraded to Hold if revenue growth falls below 5% or gross margins dip below 50%. Upgrade to Strong Buy if the stock breaks above $90 with volume. Overall, ORLY is fairly valued relative to its growth prospects, but the current price near the 52-week low offers a margin of safety.
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ORLY 12-Month Price Forecast
O'Reilly Automotive's strong fundamentals—10.2% revenue growth, expanding margins, and robust free cash flow—support a bullish stance. The stock's 9.3% annual decline appears overdone given the defensive business model and analyst target upside of 33%. However, the premium valuation (30.6x trailing PE) and acquisition uncertainty warrant medium confidence. A successful Napa integration could drive the stock to $120, while any misstep could push it back to $82. The base case of $100-110 is most likely, assuming steady execution.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on O'Reilly Auto Parts's 12-month outlook, with a consensus price target around $110.25 and implied upside of +28.1% versus the current price.
Average Target
$110.25
0 analysts
Implied Upside
+28.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$89 - $120
Analyst target range
O'Reilly Automotive is covered by 24 analysts, with a consensus recommendation of 'Buy' (mean recommendation 1.56 on a 1-5 scale where 1 is Strong Buy). The average target price is $110.25, implying approximately 33.3% upside from the current price of $82.73. The distribution leans heavily bullish, with no sell ratings and a strong buy consensus. Recent ratings from firms like DA Davidson, Mizuho, and Citigroup have reiterated Buy or Outperform ratings, indicating sustained confidence. The target price range spans from a low of $89.00 to a high of $120.00. The high target of $120.00 assumes continued market share gains, margin expansion, and successful integration of potential acquisitions, representing a 45% upside. The low target of $89.00 implies a more conservative scenario with slower growth or margin compression, still offering 7.6% upside. The relatively wide spread of $31 (34.8% of the average) indicates moderate uncertainty, likely driven by the pending acquisition speculation and near-term margin headwinds. The recent analyst actions have all been reaffirmations of positive ratings, suggesting conviction in the long-term story despite the recent price decline.
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Bulls vs Bears: ORLY Investment Factors
O'Reilly Automotive presents a compelling bull case with 10.2% revenue growth, expanding margins, robust free cash flow, and a consensus Buy rating implying 33% upside. However, the stock trades at a premium valuation (30.6x trailing PE vs. industry 22x) and is in a sustained downtrend, down 9.3% over the past year. The primary tension is whether the company's strong fundamentals and defensive business model can overcome near-term headwinds from acquisition uncertainty and margin concerns. Currently, the bull case has stronger evidence given the analyst target upside and consistent operational performance, but the stock's technical weakness and premium valuation warrant caution.
Bullish
- Strong Revenue Growth: Revenue grew 10.2% YoY in Q1 2026 to $4.56 billion, driven by balanced DIY and professional segments. This consistent mid-single-digit organic growth is supported by an aging vehicle fleet and recession-resistant demand.
- Expanding Operating Margins: Operating margin improved to 18.5% in Q1 2026 from 17.9% a year ago, reflecting operating leverage. Net margin of 13.2% is healthy and typical for specialty retailers.
- Robust Free Cash Flow: Free cash flow surged to $788 million in Q1 2026 from $468 million a year ago, driven by higher operating cash flow. This supports aggressive share buybacks ($923 million in Q1) and balance sheet strength.
- Analyst Consensus Buy: 24 analysts rate ORLY a Buy with an average target of $110.25, implying 33.3% upside from $82.73. No sell ratings and recent reaffirmations from DA Davidson, Mizuho, and Citigroup indicate sustained confidence.
Bearish
- Premium Valuation: Trailing PE of 30.6x is a 39% premium to the specialty retail industry average of 22x. The PEG ratio of 3.34x suggests the stock is priced for above-average growth, leaving little room for error.
- Stock in Sustained Downtrend: ORLY has declined 9.3% over the past year vs. the S&P 500's 20.9% gain. The stock is only 0.2% above its 52-week low of $82.59, indicating persistent selling pressure and lack of bullish momentum.
- Acquisition Uncertainty: Reports of a potential acquisition of Genuine Parts' Napa distribution business introduce integration risk and potential margin dilution. The stock fell sharply on July 6, 2026, following this news.
- Negative Shareholders' Equity: Aggressive share buybacks have driven shareholders' equity negative, resulting in a debt-to-equity ratio of -11.1x. While common for mature companies, this limits financial flexibility and increases leverage risk.
ORLY Technical Analysis
O'Reilly Automotive is in a sustained downtrend, with the stock price declining 9.3% over the past year compared to a 20.9% gain for the S&P 500. The current price of $82.73 sits near the bottom of its 52-week range, at 76.1% of the range (calculated as (82.73 - 82.59) / (108.72 - 82.59) = 0.1% above the 52-week low of $82.59). This positioning near the low suggests the stock is deeply oversold, potentially offering a value opportunity, but also reflects persistent selling pressure and a lack of bullish momentum. The 1-year relative strength of -30.2% versus the S&P 500 underscores significant underperformance. Short-term momentum remains negative, with the stock declining 8.3% over the past month and 10.8% over the past three months. The 1-month decline of 8.3% is steeper than the 3-month decline, indicating accelerating downside momentum. This divergence from the longer-term downtrend suggests the selling has intensified recently, possibly driven by the acquisition speculation and margin concerns. The relative strength over 1 month is -8.9%, confirming the stock is underperforming the market in the near term. The stock's beta of 0.513 indicates it is significantly less volatile than the overall market, meaning the decline is not driven by broad market weakness but by company-specific factors. The 52-week low of $82.59 provides immediate support; a breakdown below this level could signal further downside toward the next support zone. Resistance lies at the 52-week high of $108.72, and a breakout above that level would be a strong bullish reversal signal. The current price is only 0.2% above the 52-week low, making the stock highly vulnerable to a breakdown.
Beta
0.51
0.51x market volatility
Max Drawdown
-23.3%
Largest decline past year
52-Week Range
$83-$109
Price range past year
Annual Return
-6.0%
Cumulative gain past year
| Period | ORLY Return | S&P 500 |
|---|---|---|
| 1m | -2.7% | +0.3% |
| 3m | -8.2% | +4.7% |
| 6m | -9.1% | +7.5% |
| 1y | -6.0% | +18.4% |
| ytd | -4.7% | +9.0% |
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ORLY Fundamental Analysis
O'Reilly's revenue trajectory remains solidly positive, with the most recent quarter (Q1 2026) reporting revenue of $4.561 billion, up 10.2% year-over-year from $4.137 billion in Q1 2025. This growth rate is consistent with the prior quarter's 10.2% YoY growth (Q4 2025 revenue of $4.414 billion vs. $4.096 billion in Q4 2024), indicating stable mid-single-digit organic growth. The company's dual-market strategy continues to drive balanced expansion, with both DIY and professional segments contributing. The revenue growth supports the investment case for a defensive, recession-resistant business benefiting from an aging vehicle fleet. Profitability is strong, with net income of $604 million in Q1 2026, up from $538 million in Q1 2025, representing a 12.2% increase. Gross margin remains stable at 51.5% in Q1 2026, consistent with the 51.3% in Q1 2025 and the trailing twelve-month average of 51.6%. Operating margin improved to 18.5% from 17.9% a year ago, reflecting operating leverage. The net margin of 13.2% is healthy and typical for specialty retailers. The company is consistently profitable with expanding margins. O'Reilly maintains a strong balance sheet with robust cash generation. Free cash flow in Q1 2026 was $788 million, up from $468 million in Q1 2025, driven by higher operating cash flow of $1.033 billion. The company has a negative debt-to-equity ratio of -11.1 due to negative shareholders' equity (a result of aggressive share buybacks), but this is common for mature companies with high leverage. The current ratio of 0.77 indicates adequate liquidity. The company generates ample cash to fund operations and share repurchases, with $923 million in stock buybacks in Q1 2026 alone. The return on equity is negative (-332.5%) due to negative equity, but return on assets of 13.8% is solid.
Quarterly Revenue
$4.6B
2026-03
Revenue YoY Growth
+10.2%
YoY Comparison
Gross Margin
51.5%
Latest Quarter
Free Cash Flow
$1.9B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is ORLY Overvalued?
Since O'Reilly has positive net income, the primary valuation metric is the price-to-earnings (PE) ratio. The trailing PE is 30.6x, while the forward PE is 22.9x, implying the market expects earnings growth to justify the current price. The gap between trailing and forward PE suggests analysts anticipate significant earnings growth, which is consistent with the company's historical performance. Compared to the specialty retail industry, O'Reilly trades at a premium. The industry average PE is approximately 22x (based on available data), so O'Reilly's trailing PE of 30.6x represents a 39% premium. This premium is justified by O'Reilly's superior growth, consistent margin expansion, and dominant market position. The PEG ratio of 3.34x indicates the stock is priced at a premium to its growth rate, suggesting the market is pricing in above-average growth expectations. Historically, O'Reilly's trailing PE has ranged from 17x to 38x over the past five years. The current 30.6x is above the midpoint of this range, indicating the stock is not at a deep value level but is not excessively overvalued either. The forward PE of 22.9x is closer to the historical median, suggesting that if earnings materialize as expected, the valuation is reasonable.
PE
30.6x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 17x~38x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
21.6x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: O'Reilly's aggressive share buybacks have resulted in negative shareholders' equity (-$11.1x debt-to-equity), limiting financial flexibility. While free cash flow is robust at $788 million in Q1 2026, the company carries significant debt, with interest expense of $62.7 million in the quarter. Any slowdown in cash generation could strain debt servicing. Additionally, the stock's premium valuation (30.6x trailing PE) leaves it vulnerable to multiple compression if earnings disappoint.
Market & Competitive Risks: The stock's beta of 0.513 indicates low market correlation, but the 9.3% annual decline vs. the S&P 500's 20.9% gain shows company-specific weakness. The potential acquisition of Genuine Parts' Napa business introduces integration risk and could disrupt the competitive landscape. Regulatory risks are low, but macro headwinds like rising interest rates could compress growth stock multiples. The stock is only 0.2% above its 52-week low, suggesting high vulnerability to further selling.
Worst-Case Scenario: If the Napa acquisition fails to deliver synergies or leads to margin dilution, and revenue growth decelerates below 5%, the stock could fall to its 52-week low of $82.59 or below. Analyst low target of $89.00 implies 7.6% downside from current levels, but a break below $82.59 could trigger further declines toward $75, representing a potential loss of 9.3% from the current price. Historical max drawdown of -23.3% suggests a worst-case scenario of $63.50.
FAQ
The primary risks are: 1) Acquisition integration risk—the potential purchase of Genuine Parts' Napa business could lead to cost overruns and margin dilution. 2) Valuation risk—the trailing PE of 30.6x is above the industry average, leaving the stock vulnerable to multiple compression if growth slows. 3) Financial risk—negative shareholders' equity (-$11.1x debt-to-equity) limits financial flexibility, though strong cash flow mitigates this. 4) Technical risk—the stock is only 0.2% above its 52-week low and in a sustained downtrend, which could persist if sentiment remains negative.
The 12-month forecast is positive, with a base case target of $100-110 (50% probability) assuming steady 10% revenue growth and stable margins. The bull case (30% probability) targets $110-120, driven by successful Napa integration and margin expansion. The bear case (20% probability) sees the stock testing $82-89 if integration fails or growth decelerates. The analyst consensus average target of $110.25 implies 33.3% upside. The most likely scenario is the base case, with gradual recovery as earnings materialize.
ORLY's trailing PE of 30.6x is a 39% premium to the specialty retail industry average of 22x, suggesting it is overvalued on a historical basis. However, the forward PE of 22.9x is more reasonable and aligns with the industry average, implying that if earnings grow as expected, the stock is fairly valued. The PEG ratio of 3.34x indicates the market is pricing in above-average growth. Given the company's consistent 10%+ revenue growth and dominant market position, the premium is partially justified. At the current price near the 52-week low, the stock offers a margin of safety for long-term investors.
Yes, ORLY appears to be a good buy for long-term investors given its strong fundamentals and attractive valuation near the 52-week low. The stock trades at $82.73, offering 33.3% upside to the analyst average target of $110.25. With 10.2% revenue growth, expanding margins, and robust free cash flow of $788 million in Q1 2026, the company is executing well. However, the premium trailing PE of 30.6x and acquisition uncertainty introduce risk. For investors with a 3-5 year horizon, the defensive business model and consistent growth make it a compelling entry point.
ORLY is best suited for long-term investment (3-5 years minimum) due to its defensive business model, consistent growth, and low beta of 0.513. The stock's 9.3% annual decline and near-term acquisition uncertainty make it less suitable for short-term trading. The company's strong cash generation and share buybacks support long-term value creation. Short-term traders may find opportunities near the 52-week low, but the lack of momentum and potential for further downside suggest a longer holding period is prudent.
