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Are Investors Undervaluing Advance Auto Parts (AAP) Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is Advance Auto Parts (AAP). AAP is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 17.66, while its industry has an average P/E of 18.34. AAP's Forward P/E has been as high as 23.12 and as low as 16.97, with a median of 19.85, all within the past year.

Finally, investors will want to recognize that AAP has a P/CF ratio of 17.07. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. AAP's P/CF compares to its industry's average P/CF of 24.37. Over the past 52 weeks, AAP's P/CF has been as high as 19.64 and as low as 13.35, with a median of 16.74.

These are only a few of the key metrics included in Advance Auto Parts's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, AAP looks like an impressive value stock at the moment.


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