AAP
Advance Auto Parts, Inc.
$44.68
Stable Earnings Power
80%
P/Adj-EPS × Normalized Multiple
Moderate
·
Conviction
Undervalued
Trading 38.9% below fair value
You pay
$44.68
Bear
$64.01
Fair
$73.15
Bull
$82.30
Bear
$64.01
+43.3%
$4.57 × 14x P/E
Fair
$73.15
+63.7%
$4.57 × 16x P/E
Bull
$82.30
+84.2%
$4.57 × 18x P/E
Adjust Assumptions
16.0x
4.57$
Key Value Driver
Normalized P/E multiple (16x base case)
Implied Market Multiple
9.8x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (44 analysts)
$51.69
Divergence from AlphaVal
42%
Summary
Applying a 16x P/E to adjusted EPS of $4.57, the base-case value is $73.15 per share.
Warnings
The company's reported profits differ from official accounting profits by 526%. Check what costs are being left out of the adjusted number.
The company pays out 137% of its profits as dividends. That leaves little cushion — the dividend could be cut if business slows down.
Wall Street's average price target is $51.69 (from 44 analysts). Our estimate is 42% above the consensus -- consider that gap carefully.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples