O'Reilly Auto Parts
ORLY
$84.90
-0.15%
O'Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in North America, operating nearly 6,600 stores across 48 U.S. states, Puerto Rico, Mexico, and Canada, and serving both do-it-yourself (DIY) retail customers and professional service providers (DIFM) through a balanced revenue mix of roughly 49% DIY and 49% professional. The company is a scale-driven consolidator in a highly fragmented aftermarket parts industry, distinguished by its dual-market strategy, dense store network, and industry-leading distribution infrastructure that supports same-day parts availability for professional installers. The current investor narrative is dominated by a sharp divergence between the company's solid fundamental performance and its weak stock price, with shares down roughly 18% over the past year amid margin concerns and competitive anxiety. Recent headlines have amplified this debate, including reports that O'Reilly may acquire Genuine Parts' NAPA distribution business — a move that could reshape the competitive landscape and sent rival AutoZone shares down over 6% — while analysts continue to debate whether the recent decline represents a breakdown or a buying opportunity given robust sales growth and long-term industry tailwinds.…
ORLY
O'Reilly Auto Parts
$84.90
Related headlines
Investment Opinion: Should I buy ORLY Today?
ORLY is rated a Hold, balancing its strong fundamental performance against significant near-term headwinds and relative underperformance. The analyst consensus is a Buy with a mean recommendation of 1.54 and an average target price of $107.80, implying 25.2% upside, but the stock's 17.66% one-year decline and margin compression warrant caution. The core thesis is that ORLY's 10.24% revenue growth and robust free cash flow generation are offset by valuation concerns and competitive uncertainties, making it a wait-and-see story.
Supporting evidence for a Hold includes: 1) Revenue growth of 10.24% year-over-year in Q1 2026, demonstrating market share gains; 2) Gross margin stability at 51.47%, though operating margin compressed to 18.45% from 20.74% in Q3 2025; 3) Strong free cash flow of $1.91 billion TTM, funding buybacks and dividends (though no dividend is paid); and 4) The forward PE of 23.58x is below the trailing PE of 30.61x, suggesting earnings growth is expected. However, the PEG ratio of 3.07 and PS ratio of 4.37x indicate a premium valuation relative to peers and history.
The biggest risks that could invalidate the thesis are: 1) Continued margin erosion below 18% operating margin; 2) Failure to sustain double-digit revenue growth; and 3) Adverse outcome from the potential NAPA acquisition. The rating would upgrade to Buy if operating margin stabilizes above 19% and revenue growth remains above 10%, or downgrade to Sell if margin falls below 17% and revenue growth decelerates below 8%. Relative to its history, the stock is fairly valued to slightly overvalued, but the recent price decline has brought valuations closer to historical norms, offering a more balanced risk/reward.
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ORLY 12-Month Price Forecast
ORLY presents a balanced risk/reward profile with a neutral stance. The company's solid revenue growth and strong cash flow generation are offset by margin compression and a premium valuation that leaves little room for error. The analyst consensus is bullish, but the stock's severe underperformance (-34.88% relative to S&P 500 over one year) reflects deep market skepticism. The key tension is whether margin pressures are temporary or structural; a stabilization above 19% operating margin would likely drive a re-rating toward the bull case, while continued erosion could push the stock to new lows. I would upgrade to bullish if Q2 2026 earnings show margin recovery and revenue growth above 10%, and downgrade to bearish if operating margin falls below 18% or revenue growth decelerates below 8%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on O'Reilly Auto Parts's 12-month outlook, with a consensus price target around $107.35 and implied upside of +26.4% versus the current price.
Average Target
$107.35
0 analysts
Implied Upside
+26.4%
vs. current price
Analyst Count
—
covering this stock
Price Range
$91 - $120
Analyst target range
O'Reilly is covered by 25 analysts, and the consensus recommendation is a strong Buy with a recommendation mean of 1.54 (where 1.0 is a Strong Buy and 5.0 is a Strong Sell), reflecting broad institutional confidence in the company's fundamentals despite the stock's poor price performance. The average analyst target price is $107.80, which implies approximately 25.2% upside from the current price of $86.12, a substantial gap that suggests analysts believe the market is significantly undervaluing the stock. The consensus leans decidedly bullish, with the Buy/Hold/Sell distribution heavily skewed toward Buy ratings, and the recent institutional ratings activity shows a pattern of maintained positive ratings — DA Davidson, Mizuho, Evercore ISI, Citigroup, UBS, TD Cowen, and Wells Fargo have all reiterated Buy or Outperform ratings between February and July 2026, with no downgrades visible in the data. The target price range spans from a low of $89.00 to a high of $120.00, representing a spread of $31.00 or roughly 36% of the average target, which signals moderate-to-high uncertainty about the company's near-term trajectory. The high target of $120.00 implies roughly 39.3% upside and likely assumes successful margin recovery, continued double-digit revenue growth, and potential accretion from strategic acquisitions such as the rumored NAPA distribution deal, while the low target of $89.00 implies just 3.3% upside and prices in persistent margin compression, competitive pressures, and a challenging consumer discretionary environment. The fact that even the lowest analyst target sits above the current stock price is a notable signal that the sell-off may have been overdone relative to fundamental expectations, though the wide spread between the high and low targets suggests analysts are divided on the magnitude of the recovery. The estimated revenue average of $23.26 billion for the current fiscal year, with a range of $22.85 billion to $23.53 billion, implies continued top-line growth and provides a fundamental anchor for the bullish thesis, while the estimated EPS average of $4.67 with a tight range of $4.56 to $4.74 suggests high confidence in near-term earnings visibility.
Bulls vs Bears: ORLY Investment Factors
The bear case currently has stronger evidence due to ORLY's severe relative underperformance (-34.88% vs. S&P 500 over one year) and margin compression, which have driven the stock to near its 52-week low. However, the bull case is supported by solid 10.24% revenue growth, robust free cash flow, and a strong analyst consensus with 25.2% upside to the average target. The single most important tension is whether the recent margin compression is temporary or structural; if margins stabilize, the stock could re-rate sharply, but continued erosion would validate the bear thesis. The market appears to be pricing in persistent challenges, creating a potential value opportunity if fundamentals hold.
Bullish
- Revenue Growth Accelerating: Q1 2026 revenue of $4.56 billion grew 10.24% year-over-year, accelerating from the prior year's pace and demonstrating consistent top-line expansion across all quarters. This growth reflects market share gains and favorable aftermarket industry dynamics.
- Analyst Consensus Strong Buy: 25 analysts rate ORLY a Buy with a mean recommendation of 1.54, and the average target price of $107.80 implies 25.2% upside from the current $86.12. Even the lowest target of $89.00 sits above the current price, suggesting the sell-off may be overdone.
- Robust Free Cash Flow Generation: ORLY generated $1.91 billion in trailing twelve-month free cash flow and $788.5 million in Q1 2026 alone, funding $244.4 million in capital expenditures and $922.9 million in share buybacks. This internal cash generation supports growth without external financing.
- Industry-Leading Margins: Gross margin has been remarkably stable at 51.47% in Q1 2026, while operating margin of 18.45% and net margin of 13.25% remain among the best in the auto parts retail industry. These margins provide a cushion against cost pressures.
Bearish
- Severe Relative Underperformance: ORLY has underperformed the S&P 500 by 34.88% over the past year and 17.79% year-to-date, with the stock down 17.66% over one year. This persistent weakness signals deep investor skepticism about the company's growth durability.
- Margin Compression Trend: Operating margin declined to 18.45% in Q1 2026 from 20.74% in Q3 2025, and EBITDA margin fell to 21.45% from 23.63% over the same period. Rising SG&A costs and interest expenses are eroding profitability.
- Premium Valuation with High PEG: The forward PE of 23.58x and PEG ratio of 3.07 indicate the stock is expensive relative to its expected growth rate. The PS ratio of 4.37x and EV/EBITDA of 21.56x represent a premium to the broader specialty retail sector.
- Negative Shareholder Equity: ORLY operates with negative shareholder equity, evidenced by a debt-to-equity ratio of -11.12 and price-to-book ratio of -101.74, due to aggressive share buybacks. This capital structure increases financial risk if earnings decline.
ORLY Technical Analysis
O'Reilly is in a sustained downtrend, with the stock down 17.66% over the past year and currently trading at $86.12, which places it at just 13.5% of its 52-week range of $82.59 to $108.72. This positioning near the bottom of the annual range signals persistent selling pressure rather than a healthy consolidation, and the stock's 23.27% maximum drawdown confirms that investors have endured a meaningful correction. With the current price only about 4.3% above the 52-week low, the stock is testing territory that could represent either a value opportunity or a continuation of the downtrend, and the burden of proof rests on the bulls to defend this level. Recent momentum remains negative but shows signs of stabilization: the stock is down 3.84% over the past month and 3.84% over the past three months, while the year-to-date decline of 4.68% is less severe than the 1-year decline of 17.66%, suggesting the pace of selling has moderated in 2026. However, this stabilization is relative — the S&P 500 gained 0.69% over the past month and 17.22% over the past year, meaning O'Reilly's relative strength is deeply negative at -4.53% over one month and -34.88% over one year, indicating significant underperformance versus the broader market. The 1-month and 3-month changes are identical at -3.84%, which suggests a steady, grinding decline rather than a sharp capitulation, and the lack of a meaningful bounce off the lows implies buyers remain hesitant. Key technical support sits at the 52-week low of $82.59, and a breakdown below this level would likely trigger further selling and signal a deeper bearish trend; resistance is established at the 52-week high of $108.72, and reclaiming even the midpoint of the range would require a substantial shift in sentiment. The stock's beta of 0.515 indicates it is roughly 48.5% less volatile than the broader market, which means the magnitude of its decline is notable given its typically defensive trading characteristics — this low beta may appeal to risk-averse investors, but it also means the stock lacks the high-beta torque that drives sharp recoveries in momentum-driven rallies.
Beta
0.52
0.52x market volatility
Max Drawdown
-23.3%
Largest decline past year
52-Week Range
$83-$105
Price range past year
Annual Return
-19.1%
Cumulative gain past year
| Period | ORLY Return | S&P 500 |
|---|---|---|
| 1m | -2.4% | +0.6% |
| 3m | -5.9% | +3.3% |
| 6m | -7.1% | +17.4% |
| 1y | -19.1% | +15.0% |
| ytd | -6.0% | +12.9% |
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ORLY Fundamental Analysis
O'Reilly's revenue trajectory remains solidly positive, with Q1 2026 revenue of $4.56 billion representing 10.24% year-over-year growth from Q1 2025's $4.14 billion, continuing a multi-quarter trend of consistent top-line expansion. The sequential progression from Q1 2025 ($4.14 billion) through Q2 2025 ($4.53 billion), Q3 2025 ($4.71 billion), Q4 2025 ($4.41 billion), and Q1 2026 ($4.56 billion) demonstrates the seasonal pattern typical of the aftermarket parts business, with the most recent quarter showing healthy acceleration on a year-over-year basis. The company's single reported segment — automotive aftermarket parts — generated the entirety of Q1 2026 revenue, and the 10.24% growth rate suggests market share gains and favorable industry dynamics, though investors should monitor whether this pace is sustainable given broader consumer discretionary headwinds. Profitability remains robust, with Q1 2026 net income of $604.2 million on a 13.25% net margin, though this represents a slight compression from Q1 2025's 13.02% net margin and a more noticeable decline from Q3 2025's 15.43% peak. Gross margin has been remarkably stable, ranging from 51.28% in Q1 2025 to 51.85% in Q3 2025 and settling at 51.47% in Q1 2026, while operating margin compressed to 18.45% in Q1 2026 from 20.74% in Q3 2025, reflecting higher SG&A costs and interest expenses. The company's EBITDA margin of 21.45% in Q1 2026 remains healthy for a specialty retailer, but the sequential decline from 23.63% in Q3 2025 warrants monitoring as it suggests cost pressures are building. The balance sheet presents a mixed picture: O'Reilly operates with negative shareholder equity, evidenced by a debt-to-equity ratio of -11.12 and a price-to-book ratio of -101.74, which is a deliberate capital structure choice reflecting aggressive share buybacks — the company repurchased $922.9 million of stock in Q1 2026 alone. Free cash flow remains strong at $1.91 billion on a trailing twelve-month basis, with Q1 2026 free cash flow of $788.5 million, though the current ratio of 0.77 and quick ratio of 0.13 indicate tight short-term liquidity that is typical for retailers operating on negative working capital cycles. The interest coverage ratio of 13.41x provides ample cushion for debt servicing, and the company's ability to generate $1.03 billion in operating cash flow in a single quarter while funding $244.4 million in capital expenditures demonstrates the internal cash generation needed to sustain growth without relying on external financing.
Quarterly Revenue
$4.9B
2026-06
Revenue YoY Growth
+8.1%
YoY Comparison
Gross Margin
51.4%
Latest Quarter
Free Cash Flow
$2.2B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is ORLY Overvalued?
Because O'Reilly reported positive net income of $604.2 million in Q1 2026, the PE ratio is the appropriate primary valuation metric, and the stock currently trades at a trailing PE of 30.61x versus a forward PE of 23.58x. The substantial gap between trailing and forward multiples — implying roughly 23% earnings growth — indicates the market expects meaningful EPS acceleration, which is supported by the analyst consensus EPS estimate of $4.67 for the current year versus the trailing EPS of $0.033 (which appears distorted by data reporting conventions). The forward PE of 23.58x is more informative for valuation purposes and suggests the market is pricing in solid but not spectacular growth, while the PEG ratio of 3.07 signals that the stock may be expensive relative to its expected growth rate. On a peer comparison basis, O'Reilly's PS ratio of 4.37x and EV/EBITDA of 21.56x position it at a premium to the broader specialty retail sector, though direct aftermarket peers like AutoZone and Advance Auto Parts trade at varying multiples depending on their individual growth and margin profiles. The EV/Sales ratio of 4.26x and price-to-cash-flow ratio of 28.12x further illustrate that O'Reilly commands a quality premium, justified by its consistent 10%+ revenue growth, 51.6% gross margins, and 19.5% operating margins that are among the best in the auto parts retail industry. However, the premium valuation becomes harder to defend when the stock is underperforming the market by 34.88% over one year, suggesting the market is repricing the company's growth durability. From a historical context, O'Reilly's PE ratio has ranged from approximately 16.8x to 38.1x over the past several years, and the current trailing PE of 30.61x sits in the upper-middle portion of that band, while the PS ratio of 4.37x is well below the historical highs of 19.4x seen in Q3 2025 (though that figure appears to reflect a different share count basis). The current valuation appears more reasonable than it has been in recent quarters, with the PE compressing from 32.05x in Q1 2026 and 38.11x in Q1 2025, suggesting that the stock's price decline has brought valuations closer to historical norms even as earnings continue to grow.
PE
30.6x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 17x~38x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
21.6x
Enterprise Value Multiple
Investment Risk Disclosure
ORLY faces significant financial and operational risks, primarily stemming from its negative shareholder equity and tight liquidity. The debt-to-equity ratio of -11.12 and current ratio of 0.77 indicate a leveraged balance sheet, though interest coverage of 13.41x provides some cushion. Margin compression is a growing concern, with operating margin falling to 18.45% in Q1 2026 from 20.74% in Q3 2025, and EBITDA margin declining to 21.45% from 23.63%. Additionally, the company's aggressive share buybacks ($922.9 million in Q1 2026) reduce equity and could limit financial flexibility if earnings decline.
Market and competitive risks are elevated given ORLY's premium valuation and sector dynamics. The forward PE of 23.58x and PEG ratio of 3.07 suggest the stock is priced for growth, leaving little room for disappointment. The potential acquisition of Genuine Parts' NAPA distribution business introduces integration and regulatory risks, and could disrupt the competitive landscape. With a beta of 0.515, ORLY is less volatile than the market, but its recent 17.66% decline shows it is not immune to sector rotation or margin concerns. Macro sensitivity is moderate, but consumer discretionary spending could weaken in a recession, impacting DIY demand.
The worst-case scenario involves a continued margin decline, failure to integrate any acquisition, and a broader market downturn. In this scenario, ORLY could retest its 52-week low of $82.59, representing a 4.1% decline from the current price of $86.12. However, if fundamentals deteriorate further, the stock could fall below the analyst low target of $89.00, though that target is above the current price. A more severe downside to $75 (below the 52-week low) would imply a 12.9% loss, but this is not supported by current analyst targets. The maximum drawdown of 23.27% from the 52-week high of $108.72 to the low of $82.59 quantifies the recent pain, and a similar move from current levels could see the stock drop to around $66, a 23% loss, if bearish conditions persist.
FAQ
The key risks for ORLY are ranked as follows: 1) Margin compression, with operating margin falling to 18.45% in Q1 2026 from 20.74% in Q3 2025, which could continue if SG&A costs rise; 2) Premium valuation risk, as the PEG ratio of 3.07 and PS ratio of 4.37x leave little room for error, and a growth slowdown could trigger multiple contraction; 3) Competitive and acquisition risk, including the potential NAPA acquisition that could disrupt the industry and strain resources; and 4) Financial risk from negative shareholder equity (debt-to-equity of -11.12) and tight liquidity (current ratio of 0.77), which could limit flexibility in a downturn. These risks are significant but manageable given the company's strong cash flow and market position.
The 12-month forecast for ORLY includes three scenarios: a bull case with 30% probability targeting $108-$120, a base case with 50% probability targeting $95-$108, and a bear case with 20% probability targeting $82-$89. The base case is most likely, assuming revenue growth of 8-10% and operating margin stabilizing around 18.5%, leading the stock to trade near the analyst average target of $107.80. The bull case hinges on margin recovery above 19% and successful acquisition integration, while the bear case assumes continued margin erosion and revenue deceleration. The current price of $86.12 is near the bear case range, suggesting the market is pricing in significant pessimism, which could reverse if fundamentals improve.
ORLY appears fairly valued to slightly overvalued on a fundamental basis. The forward PE of 23.58x is below the trailing PE of 30.61x, suggesting expected earnings growth, but the PEG ratio of 3.07 indicates the stock is expensive relative to its growth rate. The PS ratio of 4.37x and EV/EBITDA of 21.56x are at a premium to the broader specialty retail sector, justified by ORLY's industry-leading margins and consistent revenue growth. Compared to its historical PE range of 16.8x to 38.1x, the current trailing PE of 30.61x sits in the upper-middle portion, but the recent price decline has brought valuations closer to historical norms. The market is pricing in solid but not spectacular growth, and any disappointment could lead to further multiple compression.
ORLY is a Hold-rated stock with a balanced risk/reward profile. The analyst consensus is Buy with a 25.2% upside to the average target of $107.80, and the company generates strong free cash flow of $1.91 billion TTM. However, the stock has underperformed the S&P 500 by 34.88% over the past year, and operating margin has compressed to 18.45% from 20.74% in Q3 2025. For long-term investors with a tolerance for volatility, the current price near the 52-week low of $82.59 could represent a value opportunity, but near-term risks remain elevated. It is a good buy only if you believe margin pressures are temporary and revenue growth can sustain above 10%.
ORLY is more suitable for long-term investment given its low beta of 0.515, consistent revenue growth, and strong free cash flow generation, which support a buy-and-hold strategy. The stock does not pay a dividend, so returns depend on capital appreciation, and its negative shareholder equity from buybacks indicates a focus on long-term value creation. Short-term trading is less attractive due to the stock's recent downtrend and lack of momentum, with a 23.27% max drawdown and negative relative strength. A minimum holding period of 2-3 years is recommended to allow for margin recovery and potential re-rating, as near-term volatility may persist. Earnings visibility is moderate, with analyst EPS estimates ranging from $4.56 to $4.74 for the current year, providing some confidence in long-term fundamentals.