Is It Too Late To Consider O'Reilly Automotive (ORLY) After Strong Multi‑Year Share Gains?

• If you are looking at O'Reilly Automotive and wondering whether the current share price still offers value, this article will walk through what the numbers actually say.
• The stock closed at US$95.35, with returns of 1.4% decline over the last 7 days, 3.9% decline over 30 days, a 5.5% gain year to date, 8.8% over 1 year, 69.1% over 3 years and 217.0% over 5 years. This raises fair questions about how much of the story might already be priced in.
• Recent coverage has focused on O'Reilly Automotive as a large US auto parts retailer, with investors paying attention to how demand for replacement parts and maintenance services shapes sentiment on the stock. Commentators have also highlighted the company in broader discussions about consumer spending and the resilience of essential retail, which helps frame recent price moves.
• Despite this track record, our valuation model gives O'Reilly Automotive a value score of 0/6, which means it does not screen as undervalued on any of the six checks. We will look at how different valuation methods arrive at that view before finishing with a more complete way to think about what the stock could be worth.

O'Reilly Automotive scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: O'Reilly Automotive Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes estimates of the cash a company could generate in the future and discounts those amounts back to today, to arrive at an estimate of what the business might be worth right now.

For O'Reilly Automotive, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $1.63b. Analysts and internal estimates project free cash flow out to 2035, with the final explicit year in this dataset at $3.78b in 2035. Within that, the projection for 2030 is $3.05b, with discounted values provided for each year to reflect the time value of money.

When all those discounted cash flows are added up, the model produces an estimated intrinsic value of about $63 per share. Compared with the recent share price of $95.35, the DCF output indicates the stock screens as around 51.4% overvalued on this measure.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests O'Reilly Automotive may be overvalued by 51.4%. Discover 56 high quality undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for O'Reilly Automotive.

Approach 2: O'Reilly Automotive Price vs Earnings (P/E)

For a profitable company like O'Reilly Automotive, the P/E ratio is a straightforward way to see how much you are paying for each dollar of current earnings. It links directly to what the business is already generating, rather than relying on long range forecasts.

The level of P/E investors are usually comfortable with tends to reflect what they expect for future earnings growth and how risky they think those earnings are. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk typically point to a lower, more cautious multiple.

O'Reilly Automotive currently trades on a P/E of 31.63x. That sits above the Specialty Retail industry average of about 21.02x and the peer group average of 19.66x. Simply Wall St’s Fair Ratio for O'Reilly Automotive is 20.12x, which is its view of a more appropriate P/E after considering factors such as earnings growth, the company’s industry, profit margins, market cap and specific risks. Because this Fair Ratio is tailored to the company rather than being a broad average, it can give a more focused read on value. With the current P/E at 31.63x versus a Fair Ratio of 20.12x, the stock screens as expensive on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your O'Reilly Automotive Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce Narratives, a simple tool on Simply Wall St's Community page that lets you set out your story for O'Reilly Automotive, link it to a forecast for revenue, earnings and margins, and see the Fair Value that results from those assumptions. You can then compare that to the current share price to consider whether the stock appears attractive or expensive, while the Narrative keeps updating as new earnings or news arrive. For example, one O'Reilly Automotive Narrative on the platform currently points to a Fair Value of US$125.00 based on more optimistic assumptions, while another points to US$67.20 based on more cautious assumptions. This highlights how different investors can look at the same company and reach very different conclusions once they connect their view of the business to the numbers.

For O'Reilly Automotive however we will make it really easy for you with previews of two leading O'Reilly Automotive Narratives:

🐂 O'Reilly Automotive Bull Case

Fair value: US$105.72

Implied discount vs last close: about 9.8% undervalued

Assumed revenue growth: 6.40% a year

• Analysts assume steady revenue growth, slightly higher profit margins and ongoing share buybacks, with the fair value estimate recently adjusted to US$105.72.
• The narrative points to supply chain diversification, inventory investment and continued store expansion as key supports for sales and margin stability.
• Analyst fair values and targets in this view sit close to the current share price, which suggests they see the shares as roughly fairly priced based on these assumptions.

🐻 O'Reilly Automotive Bear Case

Fair value: US$67.20

Implied premium vs last close: about 42.0% overvalued

Assumed revenue growth: 5.35% a year

• This more cautious view uses a lower fair value of US$67.20 and assumes slower revenue growth with a lower future P/E multiple than the bullish cohort.
• The focus is on risks from industry change, higher costs and competitive pressure, alongside concern that the current valuation could be demanding relative to those risks.
• Even though the underlying business assumptions still include growth, this camp sees a wide gap between their fair value and the current share price, which is framed as the main risk.

Do you think there's more to the story for O'Reilly Automotive? Head over to our Community to see what others are saying!

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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