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Every year, the Boston Public School system used to take the best and brightest 4th graders and herd them up like cattle and assemble them as one class at the Charles Sumner School. The name of the school was the “Advanced Class”. Back in those days, there was no political correctness and everyone didn’t get a trophy. So when $$$MR. MARKET$$$ got selected for the Advanced Class, he would sing a tune in front of all of his envious friends:
“I got into the advanced class
I’m gonna eat baked beans til I have gas
I am first, you are last
Ha ha…you can all kiss my ****”
Now needless to say, this little song didn’t go over extraordinarily well…but who cares, right? It was the Advanced Class.
So when it comes to Auto parts, what better place to look for them than at the Advance Auto Parts store:
Today I bought Advance Auto Parts 68.26. I will sell it in 4 to 6 weeks at 78.69. Here’s why I like AAP:
Wow…look at this amazing chart. All it does is go up and up and up and up in a straight line. Its PE is only 18 and the stock is already up 65% in the last 52 weeks. Sounds like something is cooking.
Advance Auto Parts, Inc., through its subsidiaries, operates as a retailer of automotive aftermarket parts, accessories, batteries, and maintenance items to do-it-yourself (DIY) and do-it-for-me customers. The company operates in two segments, Advance Auto Parts (AAP) and Autopart International (AI). The AAP segment operates stores, which primarily offer auto parts, including alternators, batteries, chassis parts, clutches, engines and engine parts, radiators, starters, transmissions, and water pumps; accessories comprising floor mats, mirrors, vent shades, MP3 and cell phone accessories, and seat and steering wheel covers; chemicals consisting of antifreeze, freon, fuel additives, and car washes and waxes; and oil and other automotive petroleum products. It also provides battery and wiper installation, battery charging, check engine light reading, electrical system testing, and oil and battery recycling services. In addition, this segment sells its products through online. As of January 2, 2010, it operated 3,264 AAP stores, including 3,238 stores located in the northeastern, southeastern, and Midwestern regions of the United States under the Advance Auto Parts and Advance Discount Auto Parts trade names, as well as 26 stores situated in Puerto Rico and the Virgin Islands under the Western Auto and Advance Auto Parts trade names.
Due to the challenging economic conditions, vehicle owners are more willing to maintain and repair their rides. Subsequently, the increase in the average age of vehicles drove demand for automotive replacement parts. The average age of the U.S. vehicle fleet has grown to just over 10 years, and the typical car has 125,000 to 155,000 miles on it. Advance Auto Parts success began in 1929 in Roanoke, VA when the Taubman family opened its first hardware store that later evolved into a regional auto parts chain. So I think it’s safe to say they know their business. Advance is the second largest US auto parts retailer and the company will add 110 stores in 2010. These companies also are benefiting from all of the recent car dealership closures. Fewer dealers mean more customers for one pump gas station garage mechanics, who usually buy their parts from places like Advanced Auto.
Advance Auto reported Annual Sales of $5.413 B in 2009. As of August 28, 2010, Advance Auto had a $ 194.50 M cash balance. Over the previous nine (9) months, Advance Auto grew its cash balance from approximately $ 100 M to $ 194.5 M. This cash balance will enable AAP to get a ton of, extremely cheap, leverage to serve as a catalyst for acquisition, growth, and consolidation in the future. Their existing Debt to Sales ratio is only about 5% which is much much lower than other national publicly traded retailers. This war chest gives them greater firepower in the event that something juicy swims in front of them.
In its most recent earnings report, third quarter of fiscal 2010, AAP smashed the silly ANAL-ysts most optimistic of expectations. Sales in the quarter came in at $1.4 billion, up 12% from $1.26 billion in the 2009 fiscal third quarter. Comparable store sales were up 10%. Third quarter comparable earnings per diluted share (EPS) were $1.03 which was a 49.3% increase over the third quarter last year. As an added bonus to EPS, more than 10% of the company's outstanding shares were retired in the past year due to share repurchase. Approximately 84.8 million shares were outstanding at the end of the quarter versus 95.4 million a year ago. This trend will most likely continue, and be an engine for continued increase in share price.
The current financial condition of AAP is very strong as evidenced by the large number of positive fundamental factors. As long as the positive fundamental outlook does not change, AAP should be a strong performer over the intermediate term. The prior quarter Operating Margine of 12% is greater than the TTM Operating Margin 9%. That’s a very strong predictor of EPS growth.
For the last 3 quarters in a row, AAP has popped over ANAL-yst estimates by double digit percent. Huh??? AAP’s forward PEG is trading at a 22% discount to the S&P 500. That’s a big difference.
ROA is 9.8% vs. the Industry Average of 6.9%. Operating Cash Flow has been positive for 3 straight years. ROE is 27% compared to the average ROE of this Industry Group of 11.5%. AAP is literally sissing all over its competition. For all hyou chartists, the 50 day Simple Moving Average is rising (Bullish). The 200 day Simple Moving Average is also rising (Bullish).
The average PE of the specialty retail group is 35. AAP’s PE of 18 and forward PE of 15 makes it the least expensive of all of its peers and its net margin of 7.1% makes it among the highest in that category. Put the two together…earnings and value…hmmm…Like chocolate and peanut butter. Its most recent earnings report surprised positively by 11%. Let’s get this out in the open. This company is underappreciated and undervalued. Even after the great earnings report, the ANAL-ysts still have it at $3.94 per share for 2010 and $4.59 per share for 2011. Huh??
So, what’s it gonna be boys? $$$MR. MARKET$$$ sees a 2011 revenue number right at $6.8 billion which will generate EPS of $5.26/share. If you take the PE of 18 and multiply it by these earnings, you get a share price of 18 x $5.26 = $94.68. That’s well past my selling target which means of course:
Yet another $$$MR. MARKET$$$ winner. But why not hear it from the CEO, Action Jackson:
“I would like to thank our 51,000 Team Members for delivering another record performance in our third quarter of 2010. Our passion for serving our customers and growing our business has enabled us to accelerate growth and capitalize on strong industry fundamentals and consumer demand for auto parts,” said Darren R. Jackson, Chief Executive Officer. “Through the strength of our Team and the focus on our strategies, we have produced comparable store sales and bottom-line results that exceeded our expectations. We will continue to focus on consistency and providing a differentiated experience by leading in service and ensuring superior parts availability.”
“We are very pleased with our strong third quarter results as we continue to reach new heights and achieve new milestones in our Company’s history, including our record return on invested capital and recent upgrade in our credit rating to full investment grade status,” said Mike Norona, Executive Vice President and Chief Financial Officer. “During our third quarter we continued to benefit from favorable industry dynamics, previous strategic investments and strong Team Member execution. Given our strong third quarter performance, we are increasing our fiscal 2010 annual EPS outlook to be in the range of $3.80 to $3.90.”
The $3.90 estimate for 2010 is $1.08 better than they did in 2009….for those of you who are in the earnings guestimate business. Me thinks this trend will continue, unless people decide they don’t want to drive their cars anymore.
I am HUGE!!
$$$MR. MARKET$$$
PS
Did you like this write up?
“I got into the advanced class
I’m gonna eat baked beans til I have gas
I am first, you are last
Ha ha…you can all kiss my ****”
Now needless to say, this little song didn’t go over extraordinarily well…but who cares, right? It was the Advanced Class.
So when it comes to Auto parts, what better place to look for them than at the Advance Auto Parts store:
Today I bought Advance Auto Parts 68.26. I will sell it in 4 to 6 weeks at 78.69. Here’s why I like AAP:
Wow…look at this amazing chart. All it does is go up and up and up and up in a straight line. Its PE is only 18 and the stock is already up 65% in the last 52 weeks. Sounds like something is cooking.
Advance Auto Parts, Inc., through its subsidiaries, operates as a retailer of automotive aftermarket parts, accessories, batteries, and maintenance items to do-it-yourself (DIY) and do-it-for-me customers. The company operates in two segments, Advance Auto Parts (AAP) and Autopart International (AI). The AAP segment operates stores, which primarily offer auto parts, including alternators, batteries, chassis parts, clutches, engines and engine parts, radiators, starters, transmissions, and water pumps; accessories comprising floor mats, mirrors, vent shades, MP3 and cell phone accessories, and seat and steering wheel covers; chemicals consisting of antifreeze, freon, fuel additives, and car washes and waxes; and oil and other automotive petroleum products. It also provides battery and wiper installation, battery charging, check engine light reading, electrical system testing, and oil and battery recycling services. In addition, this segment sells its products through online. As of January 2, 2010, it operated 3,264 AAP stores, including 3,238 stores located in the northeastern, southeastern, and Midwestern regions of the United States under the Advance Auto Parts and Advance Discount Auto Parts trade names, as well as 26 stores situated in Puerto Rico and the Virgin Islands under the Western Auto and Advance Auto Parts trade names.
Due to the challenging economic conditions, vehicle owners are more willing to maintain and repair their rides. Subsequently, the increase in the average age of vehicles drove demand for automotive replacement parts. The average age of the U.S. vehicle fleet has grown to just over 10 years, and the typical car has 125,000 to 155,000 miles on it. Advance Auto Parts success began in 1929 in Roanoke, VA when the Taubman family opened its first hardware store that later evolved into a regional auto parts chain. So I think it’s safe to say they know their business. Advance is the second largest US auto parts retailer and the company will add 110 stores in 2010. These companies also are benefiting from all of the recent car dealership closures. Fewer dealers mean more customers for one pump gas station garage mechanics, who usually buy their parts from places like Advanced Auto.
Advance Auto reported Annual Sales of $5.413 B in 2009. As of August 28, 2010, Advance Auto had a $ 194.50 M cash balance. Over the previous nine (9) months, Advance Auto grew its cash balance from approximately $ 100 M to $ 194.5 M. This cash balance will enable AAP to get a ton of, extremely cheap, leverage to serve as a catalyst for acquisition, growth, and consolidation in the future. Their existing Debt to Sales ratio is only about 5% which is much much lower than other national publicly traded retailers. This war chest gives them greater firepower in the event that something juicy swims in front of them.
In its most recent earnings report, third quarter of fiscal 2010, AAP smashed the silly ANAL-ysts most optimistic of expectations. Sales in the quarter came in at $1.4 billion, up 12% from $1.26 billion in the 2009 fiscal third quarter. Comparable store sales were up 10%. Third quarter comparable earnings per diluted share (EPS) were $1.03 which was a 49.3% increase over the third quarter last year. As an added bonus to EPS, more than 10% of the company's outstanding shares were retired in the past year due to share repurchase. Approximately 84.8 million shares were outstanding at the end of the quarter versus 95.4 million a year ago. This trend will most likely continue, and be an engine for continued increase in share price.
The current financial condition of AAP is very strong as evidenced by the large number of positive fundamental factors. As long as the positive fundamental outlook does not change, AAP should be a strong performer over the intermediate term. The prior quarter Operating Margine of 12% is greater than the TTM Operating Margin 9%. That’s a very strong predictor of EPS growth.
For the last 3 quarters in a row, AAP has popped over ANAL-yst estimates by double digit percent. Huh??? AAP’s forward PEG is trading at a 22% discount to the S&P 500. That’s a big difference.
ROA is 9.8% vs. the Industry Average of 6.9%. Operating Cash Flow has been positive for 3 straight years. ROE is 27% compared to the average ROE of this Industry Group of 11.5%. AAP is literally sissing all over its competition. For all hyou chartists, the 50 day Simple Moving Average is rising (Bullish). The 200 day Simple Moving Average is also rising (Bullish).
The average PE of the specialty retail group is 35. AAP’s PE of 18 and forward PE of 15 makes it the least expensive of all of its peers and its net margin of 7.1% makes it among the highest in that category. Put the two together…earnings and value…hmmm…Like chocolate and peanut butter. Its most recent earnings report surprised positively by 11%. Let’s get this out in the open. This company is underappreciated and undervalued. Even after the great earnings report, the ANAL-ysts still have it at $3.94 per share for 2010 and $4.59 per share for 2011. Huh??
So, what’s it gonna be boys? $$$MR. MARKET$$$ sees a 2011 revenue number right at $6.8 billion which will generate EPS of $5.26/share. If you take the PE of 18 and multiply it by these earnings, you get a share price of 18 x $5.26 = $94.68. That’s well past my selling target which means of course:
Yet another $$$MR. MARKET$$$ winner. But why not hear it from the CEO, Action Jackson:
“I would like to thank our 51,000 Team Members for delivering another record performance in our third quarter of 2010. Our passion for serving our customers and growing our business has enabled us to accelerate growth and capitalize on strong industry fundamentals and consumer demand for auto parts,” said Darren R. Jackson, Chief Executive Officer. “Through the strength of our Team and the focus on our strategies, we have produced comparable store sales and bottom-line results that exceeded our expectations. We will continue to focus on consistency and providing a differentiated experience by leading in service and ensuring superior parts availability.”
“We are very pleased with our strong third quarter results as we continue to reach new heights and achieve new milestones in our Company’s history, including our record return on invested capital and recent upgrade in our credit rating to full investment grade status,” said Mike Norona, Executive Vice President and Chief Financial Officer. “During our third quarter we continued to benefit from favorable industry dynamics, previous strategic investments and strong Team Member execution. Given our strong third quarter performance, we are increasing our fiscal 2010 annual EPS outlook to be in the range of $3.80 to $3.90.”
The $3.90 estimate for 2010 is $1.08 better than they did in 2009….for those of you who are in the earnings guestimate business. Me thinks this trend will continue, unless people decide they don’t want to drive their cars anymore.
I am HUGE!!
$$$MR. MARKET$$$
PS
Did you like this write up?
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