O'Reilly Auto Parts
ORLY
$94.40
+1.44%
O'Reilly Automotive, Inc. is a leading aftermarket automotive parts retailer operating over 6,000 stores in the United States and Mexico, generating more than $16 billion in annual sales. The company is a dominant market leader, distinguished by its powerful hub-and-spoke distribution network and a balanced revenue mix serving both do-it-yourself customers and professional service providers. The current investor narrative is focused on the stock's recent price decline, which is being driven by short-term margin concerns and a challenging market environment, despite the company's robust sales growth, market share gains, and the powerful long-term tailwinds of an aging vehicle fleet.…
ORLY
O'Reilly Auto Parts
$94.40
Related headlines
ORLY 12-Month Price Forecast
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 $122.72 and implied upside of +30.0% versus the current price.
Average Target
$122.72
5 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
5
covering this stock
Price Range
$76 - $123
Analyst target range
Analyst coverage for O'Reilly is limited but consistently bullish, with only 5 analysts providing estimates according to the data. The institutional ratings show a unanimous bullish sentiment, with recent actions from firms like Citigroup, JP Morgan, and Morgan Stanley all maintaining Buy, Overweight, or Outperform ratings. The consensus recommendation is strongly positive, though the average target price cannot be calculated from the provided data which only includes EPS and revenue estimates. The lack of a specific price target range in the data set indicates that while sentiment is clear, quantified upside projections are not available in this snapshot. The pattern of recent analyst actions shows no downgrades, only reaffirmations of bullish ratings throughout early 2026. This suggests that the institutional analyst community views the recent stock weakness as disconnected from the company's long-term fundamental strength and is likely maintaining or even seeing improved value at lower prices. The limited number of analysts (5) covering this large-cap stock is notable and may contribute to higher volatility, as price discovery is influenced by a smaller pool of published research, though the consistent bullishness across those firms provides a clear signal of professional confidence.
Bulls vs Bears: ORLY Investment Factors
The investment debate for O'Reilly Automotive centers on a clash between its high-quality, profitable business model and its premium valuation in the face of emerging operational pressures. The bull case, supported by strong analyst sentiment and defensive cash flows, currently holds stronger evidence of long-term fundamental strength. However, the bear case is gaining traction in the near term, as evidenced by the sharp price decline driven by margin concerns. The single most important tension is whether the recent margin compression (Q4 operating margin of 18.77% vs. Q3's 20.74%) is a temporary blip or the beginning of a sustained erosion of profitability. The resolution of this issue will determine if the stock's premium multiple is justified or due for a significant correction.
Bullish
- Robust Profitability & Margins: The company maintains a strong gross margin of 51.79% and a net margin of 13.71% as of Q4 2025, demonstrating superior operational efficiency. This profitability, coupled with trailing twelve-month free cash flow of $1.59 billion, provides significant financial flexibility for shareholder returns and reinvestment.
- Dominant Market Position & Tailwinds: As a leader with over 6,000 stores and $16B+ in sales, ORLY benefits from a powerful hub-and-spoke distribution network and a balanced DIY/professional revenue mix. The company is positioned to capitalize on the long-term tailwind of an aging U.S. vehicle fleet, which supports steady demand for aftermarket parts.
- Unanimous Analyst Bullishness: All 5 covering analysts maintain Buy-equivalent ratings, with recent reaffirmations from major firms like Citigroup and JP Morgan. This consistent institutional confidence suggests the recent stock decline is viewed as a disconnect from long-term fundamentals, presenting a potential buying opportunity.
- Defensive Low-Beta Profile: With a beta of 0.598, ORLY is approximately 40% less volatile than the broader market. This defensive characteristic, evidenced by its -3.23% 1-year return versus the S&P 500's +22.2% gain, makes it a potential portfolio stabilizer during market downturns.
Bearish
- Elevated Valuation Premium: ORLY's trailing P/E of 30.60x and forward P/E of 25.59x are at a significant premium to typical auto parts retail multiples. This high valuation leaves little room for error and makes the stock vulnerable to multiple compression if growth decelerates or margins contract further.
- Significant Margin Pressure: Operating margin declined from 20.74% in Q3 2025 to 18.77% in Q4 2025, a key driver of the recent stock sell-off. This sequential pressure, highlighted in recent news, raises concerns about the company's ability to maintain its historically high profitability in a competitive environment.
- Revenue Growth Deceleration: Q4 2025 revenue of $4.41B grew 7.78% YoY, but this represents a sequential decline from Q3's $4.71B. This moderation from higher growth rates earlier in 2025 suggests demand normalization and potential cyclical or competitive headwinds that could challenge future growth.
- Highly Leveraged Balance Sheet: The debt-to-equity ratio is a negative -11.12, and return on equity is -3.33%, artifacts of aggressive share buybacks that have eroded equity. While cash flow is strong, the low current ratio of 0.77 indicates limited liquidity to handle unforeseen shocks.
ORLY Technical Analysis
The stock is in a sustained downtrend, with a 1-year price change of -3.23% and a more severe 6-month decline of -12.76%. As of the latest close of $91.42, the stock is trading at approximately 41% of its 52-week range (between $86.77 and $108.72), positioning it much closer to its 52-week low. This proximity to multi-year lows suggests the market is pricing in significant pessimism, presenting a potential value opportunity if the fundamentals stabilize, but also risks of further downside if the negative trend persists. Recent momentum shows a slight divergence, with a positive 3-month change of 1.20% contrasting with a negative 1-month change of -2.61%. This indicates the stock may be attempting to find a bottom after the steep decline in late 2025 and early 2026, though the short-term weakness suggests the recovery attempt is fragile and lacking strong conviction. Key technical support is clearly defined at the 52-week low of $86.77, while resistance lies at the 52-week high of $108.72. A decisive break below support would signal a continuation of the bearish trend, whereas a sustained move above the recent trading range could indicate a reversal. The stock's beta of 0.598 indicates it is approximately 40% less volatile than the broader market (SPY), which has been in a strong uptrend (+22.2% over 1 year), highlighting ORLY's significant underperformance and defensive characteristics during this period.
Beta
0.60
0.60x market volatility
Max Drawdown
-19.0%
Largest decline past year
52-Week Range
$87-$109
Price range past year
Annual Return
+5.0%
Cumulative gain past year
| Period | ORLY Return | S&P 500 |
|---|---|---|
| 1m | -0.3% | +0.4% |
| 3m | +0.6% | -2.0% |
| 6m | -7.6% | +4.1% |
| 1y | +5.0% | +23.9% |
| ytd | +4.5% | -0.3% |
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ORLY Fundamental Analysis
Revenue growth remains positive but has shown signs of deceleration. The most recent quarterly revenue (Q4 2025) was $4.41 billion, representing a solid 7.78% year-over-year growth. However, this growth rate has moderated from the higher levels seen in prior quarters of 2025 (e.g., Q3 revenue of $4.71 billion), indicating a normalization of demand. The company continues to benefit from industry tailwinds, but the sequential decline from Q3 to Q4 revenue suggests potential cyclical or competitive pressures. Profitability remains strong with a net income of $605.2 million in Q4 2025 and a robust gross margin of 51.79%. The net margin for the quarter was 13.71%, demonstrating the company's ability to convert sales to bottom-line profit efficiently. While gross margins have remained stable around the 52% level, operating margins have shown some quarterly fluctuation, with the Q4 operating margin of 18.77% being lower than the 20.74% reported in Q3, which aligns with recent news about margin concerns. The balance sheet and cash flow picture is mixed, characterized by strong cash generation but a highly leveraged equity structure due to aggressive share buybacks. The company generated substantial free cash flow of $1.59 billion on a trailing twelve-month basis and an operating cash flow of $633.5 million in Q4 alone. However, the debt-to-equity ratio is a negative -11.12, and return on equity is negative at -3.33%, which are artifacts of significant share repurchases reducing shareholder equity. The current ratio of 0.77 indicates a relatively low level of liquidity, which is typical for the retail industry but warrants monitoring given the debt load.
Quarterly Revenue
$4.4B
2025-12
Revenue YoY Growth
+0.07%
YoY Comparison
Gross Margin
+0.51%
Latest Quarter
Free Cash Flow
$1.6B
Last 12 Months
Revenue & Net Income Trends (2 Years)
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Valuation Analysis: Is ORLY Overvalued?
Given the company's positive and substantial net income, the primary valuation metric is the Price-to-Earnings (PE) ratio. The trailing PE ratio is 30.60x, while the forward PE is lower at 25.59x. This gap suggests the market is anticipating earnings growth, with forward estimates implying an earnings increase that would justify the current price. The forward multiple reflects expectations for continued, albeit potentially slower, profit expansion. Compared to sector averages, O'Reilly's valuation appears elevated. Its trailing PE of 30.60x and forward PE of 25.59x are at a significant premium to typical auto parts retail multiples, which often trade in the high-teens to low-20s. This premium is likely justified by the company's superior market position, consistent profitability, and strong cash flow generation relative to peers, but it also leaves little room for error if execution falters. Historically, the stock's current trailing PE of 30.60x is above its own multi-year average seen in the historical ratios data, which has frequently been in the mid-20s. Trading near the higher end of its historical valuation band suggests the market has been pricing in optimistic expectations for sustained growth and margin stability. The recent price pullback may be a market reassessment of whether those high expectations are still warranted given the emerging margin pressures.
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
Financial & Operational Risks: O'Reilly faces significant risks from its leveraged capital structure and margin trajectory. The negative debt-to-equity ratio of -11.12, resulting from aggressive share repurchases, creates a fragile equity base, though it is supported by robust annual free cash flow of $1.59B. The more immediate risk is operational: the 197 basis point sequential decline in operating margin from Q3 to Q4 2025, if it continues, would directly undermine earnings growth and the justification for its premium valuation. Furthermore, revenue growth decelerating to 7.78% YoY in Q4 from higher prior-quarter levels indicates sensitivity to consumer cyclicality.
Market & Competitive Risks: The primary market risk is valuation compression. Trading at a forward P/E of 25.59x, ORLY commands a substantial premium to the auto parts retail sector. In a rising interest rate environment or a sector rotation away from growth, this premium could rapidly contract, pressuring the stock price independent of business performance. The stock's low beta of 0.598 has not protected it recently, as it has significantly underperformed the market (-3.23% vs. SPY +22.2% over 1 year), showing it carries unique company-specific risks. Competitive intensity and potential market share battles could further pressure pricing and margins.
Worst-Case Scenario: The worst-case scenario involves a perfect storm of sustained margin erosion, a recessionary drop in DIY automotive spending, and a full valuation de-rating. This could trigger a break below the key technical support at the 52-week low of $86.77. Given the stock's historical max drawdown of -19.03% and its current proximity to lows, a realistic adverse scenario could see a decline of 15-20% from the current price of ~$91.42, pushing it toward the $73-$78 range, representing a loss of approximately $14-$18 per share for investors.