Advance Auto Parts, Inc. (AAP)
Valuation Overview•Is Advance Auto Parts, Inc. Overvalued or Undervalued?
Priced at a premium to peer multiples and intrinsic cash flows, demanding strong execution to justify current levels.
Fragile underlying quality score of 30/100; weak margins or elevated debt leverage warrant caution.
Wall Street forecasts a balanced outlook with consensus price targets near the current price.
Verdict: Mixed fundamental profile with offsetting strengths and weaknesses.
Wall Street sentiment is generally neutral alongside robust expected earnings growth. However, capital return yields remain modest, anchored by a strong, well-covered dividend yield.
AAP struggles with subpar profitability and pressured margins. However, this is severely offset by a highly leveraged balance sheet (Debt/EBITDA > 4.0x) and elevated financial risk.
The company is facing top-line contraction (-2.0% 3Y CAGR) however, earnings have severely contracted over the same period. However, profitability remains a major concern with severely compressed operating margins (3.2%).
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $2.6B | -5.4% | -2.0% | -3.2% | -1.2% | |
| EBITDA | $173.0M | — | -17.6% | — | — | |
| Net Income | $24.0M | +113.1% | -54.4% | — | -21.1% | |
| EPS (Diluted) | $0.39 | +113.0% | -54.3% | -36.6% | -19.5% | |
| Free Cash Flow | -$75.0M | -209.9% | — | — | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 44.0% | 40.9% | 42.8% | 43.4% |
| Operating Margin | 3.2% | -0.7% | 2.2% | 4.6% |
| Net Margin | 0.5% | -1.0% | 1.5% | 3.2% |
| FCF Margin | -2.0% | -1.3% | 1.5% | 3.2% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $0.39 | $0.77 | +97.4% | ||
| Q1'26 | $0.41 | $0.86 | +109.8% | ||
| Q4'25 | $0.74 | $0.92 | +24.3% | ||
| Q3'25 | $0.59 | $0.69 | +16.9% | ||
| Q2'25 | $-0.81 | $-0.22 | +72.8% | ||
| Q1'25 | $-1.38 | $-1.18 | +14.5% | ||
| Q4'24 | $0.50 | $-0.04 | -108.1% | ||
| Q3'24 | $0.94 | $0.75 | -20.2% |
Total return is +25.8% (1Y), outperforming the benchmark by +0.9%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | +55.8% | +46.5% | — |
| 1Y | +25.8% | +0.9% | +2.1% |
| 3YCAGR | -2.5% | -23.0% | +4.4% |
| 5YCAGR | -17.8% | -30.6% | +6.5% |
| 10YCAGR | -7.0% | -20.8% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about Advance Auto Parts, Inc. (AAP) valuation, health, and returns.
Advance Auto Parts, Inc. is estimated to be overvalued under our discounted cash flow framework. relative multiples indicate the stock is Slightly expensive versus peers compared to industry peers. overvalued (implying -21.3% downside from DCF intrinsic value of $47.28)
Advance Auto Parts, Inc. has multiple valuation anchors: DCF Intrinsic Value: $47.28 | Peer Relative Fair Value: $51.35 | Wall Street Analyst Target: $59.64 (implying -0.8% upside). A convergence of these signals offers higher conviction.
Advance Auto Parts, Inc. displays weak financial health with a composite quality score of 30/100, supported by a Altman Z-Score of 1.3 (distress zone), Piotroski F-Score of 4/9, Return on Invested Capital (ROIC) of 2.9%.
Advance Auto Parts, Inc. pays a 1.6% dividend yield, covered by a 136% payout ratio with 0 years of growth, supplemented by a 0.0% buyback yield.
Advance Auto Parts, Inc.'s current growth trajectory is Decelerating. The company achieved -5.4% 1Y revenue growth and +113.0% 1Y EPS growth, compared to its 3Y revenue CAGR of -2.0%.
Wall Street consensus is Hold based on 44 analysts, beating EPS expectations in 50% of recent quarters with a 6-quarter streak. The consensus price target represents a -0.8% change from current levels.
Investment risks for Advance Auto Parts, Inc. include: -41.7% 1-year max drawdown, elevated distress risk, stretched payout ratio. Volatility risk is characterized by a beta of 1.19x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.