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Should You Think About Buying Advance Auto Parts, Inc. (NYSE:AAP) Now?

Simply Wall St

Advance Auto Parts, Inc. (NYSE:AAP), which is in the specialty retail business, and is based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of US$170 and falling to the lows of US$132. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Advance Auto Parts's current trading price of US$132 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Advance Auto Parts’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Advance Auto Parts

What is Advance Auto Parts worth?

Great news for investors – Advance Auto Parts is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $191.06, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that Advance Auto Parts’s share price may be quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Advance Auto Parts?

NYSE:AAP Past and Future Earnings, February 2nd 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Advance Auto Parts’s earnings over the next few years are expected to increase by 42%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since AAP is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on AAP for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AAP. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Advance Auto Parts. You can find everything you need to know about Advance Auto Parts in the latest infographic research report. If you are no longer interested in Advance Auto Parts, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.