ORLY - Embedded Expectations Analysis - 2020 02 18
ï€ O'Reilly Automotive, Inc. (ORLY:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with a 25.0x Uniform P/E. At these levels, the market has somewhat bullish expectations for the firm, and management is confident about their sales and EPS growth, their inventory sell-through, and the strength of their supply chainï€ Specifically, management is confident sales increased by $184mn in the quarter, EPS increased by over 10% year-over-year, and that they repurchased a total of $1.3bn worth of shares. Moreover, they are confident that when establishing guidance, they expected a larger gross margin benefit from the sell-through of lower-cost inventory in the first half, and they are confident that their ability to get parts in the hands of customers faster than competitors is a key to their success
O'Reilly Automotive is a retailer of automotive aftermarket parts, tools, supplies, equipment and accessories, selling its products to both do-it-yourself and service provider customers. The company's stores carry a product line, including: new and remanufactured automotive hard parts and maintenance items, such as alternators, batteries, brake system components, belts, chassis parts, driveline parts, engine parts, fuel pumps, hoses, starters, temperature control, water pumps, antifreeze, appearance products, engine additives, filters, fluids, lighting, oil and wiper blades; and accessories, such as floor mats, seat covers and truck accessories.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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