sell advance auto parts before it is too late
With the stock up more than half, there is a monster 2018.
At the bottom, it was suggested that 17 years later in November 20 had proved to be an excellent buying opportunity, and the multi-share pull had doubled back to the past few months.
Nevertheless, as investors are very excited about the recent results and the share of the advance payment is still high, I think this is still a great opportunity to sell the stock and buy it at a lower valuation in the future.
Advance\'s results have been better in recent quarters, so there is reason to maintain a degree of optimism.
However, the company is three pure-
Auto parts retailer-the other two are AutoZone (AZO)and O’Reilly (ORLY)
But it also has the highest valuation.
This inconsistency is the reason why I think senior shareholders will suffer losses in the short term, because stocks need to be valued much lower than this day.
Investor optimism seems to focus on comparable sales earnings.
Key indicators rose in the last quarter.
6%, take the YTD number + 2%.
It doesn\'t matter. it\'s certain that 4.
6% is a strong performance.
However, if we look at the history of Advance, we will find that its store productivity has hardly opened up new areas.
The EMarketerThis chart shows comparable sales for the company over the past five years and the results are not optimistic.
When other major auto parts retailers saw strong comparable sales growth, advances were on the ice.
In fact, the only number over zero in the past five years is + 2% in 2014;
Everything else is dull or negative.
The increase in the first three quarters of this year was + 2%, so Advance wants to break this negative cycle, but this is not the reason to buy overpriced stocks.
Remember, the third quarter of last year was-3.
4% display, so two-
Q3\'s annual cumulative comparable sales are only 1. 2%.
Instead, 0 was released in advance.
Q3 6% last year, 0.
6% in the third quarter of this year, the end result is the same, but I don\'t think investors will be so excited.
The point here is that while progress does promote comparable sales, it does so at a low level.
As a result, these gains are not impressive, but only trace back the previous losses to a large extent.
In my opinion, this is comparable sales equivalent to a dead cat bounce.
This creates a problem because comparable sales account for the full amount of Advance revenue due to its well-established store base.
In fact, revenue growth in the third quarter was actually lower than comparable sales growth, indicating this.
If my view of comparable sales is right-the data suggests I\'m right-then the way forward will be tough in terms of revenue growth.
Unless a major acquisition is made, the company may gather some very low single-digit earnings over the next few years.
Profit margins performed well, but earnings were relatively small and were not an important driver of revenue growth.
The gross profit margin rose by 86 basis points in the third quarter, and investors were very excited again.
This is the same as comparable sales, however, since the advance payment is only on the land that is lost retroactively.
In the past few years, the company\'s gross profit margin has generally been above 45%, with a gross profit margin of 44 in the third quarter.
After 3% accounted for the increase of 86bps.
In other words, the gross profit margin began to decline from the trough, and investors cheered as if the progress had made great gains in terms of profitability;
It simply recycles what it has lost.
These are not signs of a great business, and while there is no problem with progress, it is seen as a huge increase in the next few years, when the numbers indicate that the situation is not as it is at this time.
Advance payment transaction of 20.
Next year\'s profit is estimated to be double that of $8.
16, and AutoZone trading 13.
Double the forward earnings of $62.
99 and O\'Reilly traded 19.
The expected earnings were four times that of $17. 82 per share.
This means that today, Advance is also trading at the highest valuation, and Advance is the weakest of the three companies and has been around for years.
In fact, it trades AutoZone at a premium of 50%, an irreconcilable Bay.
O\'Reilly offers better prospects for growth, and while I also think the stock is overvalued as well, it is not as overvalued as it is today.
Based on Advance\'s poor performance in recent years and the irrational boom of investors on the basis of tracing back early losses in comparable sales and profit margins, I have to rate Auto a premium.
Valuation is Sky price-
Based on what may be in the middle, high, meaningless
Achieved single-digit revenue growth in the next few years.
We may see low single digit revenue growth, zero to low single digit profit margin growth, and low single digit downwind of the stock repurchase program.
It\'s hardly worth 20 or the best forward p/e. in-
When there is a better choice, classify the valuation.
Do yourself a favor, don\'t be troubled by the hype;
Progress is getting lower and lower.
Disclosure: I/we have no positions in any of the stocks mentioned and no plans to start any positions in the next 72 hours.
This article was written by myself and expressed my views.
I received no compensation (
In addition to Seeking Alpha).
I have no business relationship with any stock company mentioned in this article.