Is O’Reilly Automotive, Inc. (NASDAQ:ORLY) potentially undervalued?

O’Reilly Automotive, Inc. (NASDAQ:ORLY) has received a lot of attention following a substantial price increase on the NASDAQGS over the past few months. With many analysts covering large-cap stocks, we can expect any price-sensitive announcements to have already factored into the stock price. But what if there is still an opportunity to buy? Let’s take a look at O’Reilly Automotive’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for O’Reilly Automotive

What is the opportunity at O’Reilly Automotive?

The stock currently seems quite valued according to my valuation model. It’s trading around 14% below my intrinsic value, which means if you buy O’Reilly Automotive today, you’ll pay a fair price for it. And if you think the stock is really worth $855.30, then there’s not much room for the stock price to rise beyond where it’s currently trading. Although there may be an opportunity to buy in the future. This is because O’Reilly Automotive’s beta (a measure of stock price volatility) is high, which means that its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s stock will likely fall more than the rest of the market, providing an excellent buying opportunity.

What does the future of O’Reilly Automotive look like?

NasdaqGS: Growth in ORLY’s results and revenue August 22, 2022

Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. With earnings expected to grow 13% in double digits over the next two years, the outlook is positive for O’Reilly Automotive. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.

What this means for you

Are you a shareholder? ORLY’s optimistic future growth appears to have been priced into the current share price, with the stock trading around its fair value. However, there are also other important factors that we have not considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy if the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on ORLY, now might not be the most optimal time to buy, given that it’s trading around its fair value. However, the positive outlook is encouraging for the company, meaning it is worth digging deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to learn more about O’Reilly Automotive, you should also consider the risks it currently faces. When we did our research, we found 3 warning signs for O’Reilly Automotive (1 makes us a little uneasy!) which we believe deserve your full attention.

If you are no longer interested in O’Reilly Automotive, you can use our free platform to view our list of over 50 other stocks with high growth potential.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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