AAP
Advance Auto Parts, Inc.
$52.04
Stable Earnings Power
80%
P/Adj-EPS × Normalized Multiple
Strong
·
Conviction
Undervalued
Trading 46.8% below fair value
You pay
$52.04
Bear
$85.63
Fair
$97.86
Bull
$110.09
Bear
$85.63
+64.5%
$7.14 × 14x P/E
Fair
$97.86
+88.0%
$7.14 × 16x P/E
Bull
$110.09
+111.6%
$7.14 × 18x P/E
Key Value Driver
Normalized P/E multiple (16x base case)
Implied Market Multiple
7.3x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $59.64 from 44 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $97.86 per share.
Warnings
The company's reported profits differ from official accounting profits by 878%. 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 $59.64 (from 44 analysts). Our estimate is 92% 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