Advance Auto Parts Inc (AAP) stock analysis

P/E above its 5-year median

Advance Auto Parts's P/E of 27.9 is above its own 5-year median of 23.6.

P/E above the industry

Advance Auto Parts's P/E of 27.9 is above the Automotive Dealers and Gasoline Service Stations median of 15.6.

EV/EBITDA below its 5-year median

Advance Auto Parts's EV/EBITDA of 6.0 is below its 5-year median of 10.1.

P/B below the industry

Advance Auto Parts's price-to-book of 1.22 is below the Automotive Dealers and Gasoline Service Stations median of 1.59.

Trading below fair value

The share price of $45.69 is below our fair value estimate of $56.84.

Margin of safety under 20%

The price is 19.6% below fair value, less than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew -2.0% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew -54.3% a year over the last three fiscal years.

Earnings acceleration

Needs positive net income now, a year ago and five years ago.

Growing slower than the industry

Revenue grew -0.3% over the last twelve months; the Automotive Dealers and Gasoline Service Stations median is 4.4%.

Guidance lowered

Advance Auto Parts lowered its Full Year 2026 Market hub openings outlook on Aug 20, 2026.

Gross margin improving

Gross margin was 45.0% over the last twelve months, against 37.2% a year earlier.

Return on equity under 15%

Return on equity was 4.5% over the last twelve months and averaged 4.6% over five years; we look for 15% on both.

Return on capital under 10%

Return on invested capital was 8.4%, below the 10% that usually covers the cost of capital.

Return on equity below the industry

Advance Auto Parts's return on equity of 4.5% is below the Automotive Dealers and Gasoline Service Stations median of 11.8%.

Earnings shrank over 5 years

Net income shrank 38.3% a year on average over the last five fiscal years.

Net margin below its 5-year average

Net margin was 1.2% over the last twelve months, against a 5-year average of 1.5%.

Net margin above the industry

Advance Auto Parts's net margin of 1.2% is above the Automotive Dealers and Gasoline Service Stations median of -1.9%.

High debt

Debt is 150% of shareholders' equity, above the 40% we consider low.

Debt rising against equity

Debt to equity rose from 29.2% five years ago to 150%.

Debt not well covered by cash flow

Operating cash flow over the last twelve months equals 11.3% of total debt; we look for at least 20%.

Interest coverage

Interest expense is not reported separately.

Short-term assets cover short-term debts

Current assets are 1.63 times current liabilities.

Elevated bankruptcy risk

The Altman Z-score is 1.75; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Advance Auto Parts paid dividends worth 2.2% of the share price over the last twelve months.

Yield below Treasuries

The 2.2% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Advance Auto Parts yields 2.2%.

Dividend was cut

The dividend per share fell by more than 10% at least once in the last 10 fiscal years.

Covered by earnings

Dividends take 60.0% of net income.

Covered by free cash flow

Dividends take 68.2% of free cash flow.