Assessing Whether Advance Auto Parts (AAP) Looks Overvalued After Recent Share Price Momentum

Why Advance Auto Parts is on investors’ radar today

Advance Auto Parts (AAP) has drawn fresh attention after recent trading left the shares showing mixed short term moves, with a 0.9% 1 day decline, in contrast to gains over the month and past 3 months.

See our latest analysis for Advance Auto Parts.

At a share price of US$55.37, Advance Auto Parts has recently seen a 7 day share price return of a 5.9% decline, set against a 30 day share price return of 18.4% and a year to date share price return of 42.4%. The 1 year total shareholder return of 32.3% contrasts with weaker 3 and 5 year total shareholder returns that remain deeply negative, which suggests recent momentum is building off a much tougher longer term run.

If this has you thinking about where else capital is moving in the market, it could be a good moment to scan 22 top founder-led companies and see what stands out to you.

With AAP trading near its analyst price target and recent gains following years of weaker total returns, the big question is whether the current valuation leaves upside on the table or if the market already prices in future improvement.

Most Popular Narrative: 8% Overvalued

With Advance Auto Parts last closing at $55.37 against a narrative fair value of about $51.29, the current share price sits above that implied estimate. This estimate hinges on a detailed set of revenue, margin and valuation assumptions.

The consolidation of distribution centers (DCs) from 38 to 12 by 2026 aims to enhance supply chain efficiency. This reorganization, along with new market hub stores, is projected to reduce supply chain costs and improve gross margins, impacting earnings positively.

Read the complete narrative.

Want to see what kind of earnings turnaround and margin rebuild are baked into that fair value? The narrative leans on a profit shift and a tighter valuation multiple. Curious how cautious revenue assumptions still support today’s price?

Result: Fair Value of $51.29 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, weaker early 2025 sales trends and the costs tied to closing hundreds of stores could easily disrupt this margin rebuild story.

Find out about the key risks to this Advance Auto Parts narrative.

Next Steps

If this mix of concerns and optimism has you on the fence, take a closer look now and weigh both sides yourself with 2 key rewards and 2 important warning signs.

Looking for more investment ideas?

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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.

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