Let's talk about the popular Advance Auto Parts, Inc. (NYSE:AAP). The company's shares saw a decent share price growth in the teens level on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Advance Auto Parts’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Advance Auto Parts worth?
Great news for investors – Advance Auto Parts is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $260.19, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Advance Auto Parts’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Advance Auto Parts?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 56% over the next couple of years, the future seems bright for Advance Auto Parts. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
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 an optimistic 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 financial health 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.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Advance Auto Parts.
If you are no longer interested in Advance Auto Parts, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.