Why This Key Indicator Bodes Well for O’Reilly Automotive
If I asked you to name a stock that has increased more than eightfold over the past decade, you'd probably begin searching within the tech sector. A boring, stable company like O'Reilly Automotive (NASDAQ: ORLY) has done just that. The automotive aftermarket parts supplier has historically been a fantastic company to own, but recent developments require a reassessment of the investment thesis.
O'Reilly Automotive possesses outstanding financials. Earnings have risen at a compounded annual rate of 12.3% from fiscal 2014 through fiscal 2019. In fact, 2019 was the company's 27th consecutive year of same-store sales growth. During the last five years, diluted shares outstanding have decreased more than 26%. This is extremely advantageous, as it boosts the per share earnings applicable to existing shareholders. Although the buyback program was temporarily suspended in March because of the coronavirus pandemic, it's always good to partner with a management team focused on utilizing free cash flow to reduce share count. Furthermore, CEO Greg Johnson does a great job at being very clear and transparent about the company's capital allocation strategy in his annual shareholder letters.
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