Jeff Fischer, Portfolio Manager at The Motley Fool, says O’Reilly Automotive Inc (NASDAQ:ORLY) is a well-run company that is seeing earnings per share growth over 20% year after year.
They operate 4,500 auto part stores, and they’re adding about 200 stores per year. They expect to add 210 this year. And the company is just exceptionally well-run and has a lot of demographics working in its favor: more cars on the road, record number of cars are being sold. Unemployment is going down, which of course means more people are driving. A lower price of gas leads to more miles being driven as well.
The company has just been really about phenomenal operation by management. For seven straight years, earnings per share have grown 20% or higher per year with 28 straight quarters of earnings per share growth above 20%. Same-store sales grew more than 7% every quarter last year in 2015.
So what’s happening is customer loyalty is very strong, and the company still has a lot of room to expand in the Northeast as well as other parts of the country, so they continue to look at acquisition targets as well. They grew earnings per share 25% last year, and they should grow earnings per share 16% to 20% this year. The stock trades in kind of a mid-20s value multiple on most metrics, but I think that premium is worth it.
Fischer says O’Reilly is also a good example of how a company employs new technology to its benefit.
One of the reasons they’re so profitable and growing so strongly is they invested early in data and information, and that helps them have the right auto part at the right time at the right place for people, and that’s a big convenience. When your car breaks down and you need a part, you’re going to get it from whoever can get it to you quickest. So companies that know how to harness the power of technology and use it to their advantage are certainly something that we look for.
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