10 Worst Affordable Stocks To Buy Right Now

3. Advance Auto Parts, Inc. (NYSE:AAP)

Forward P/E Ratio: 19.24

Earnings Growth This Year: 336.00%

Number of Hedge Fund Holders: 39

Short % of Shares Outstanding: 15.81%

Advance Auto Parts, Inc. (NYSE:AAP) is an auto parts company in North America. It serves both industry operators and DIY customers. The company has approximately 4,785 stores and 320 Worldpac branches in the United States and sells parts from various original equipment manufacturer brands.

The company has been facing a series of market challenges which has led to a decrease of 29.26% in the share price over the past year. The stock short interest as a percentage of outstanding shares is also high at 15.81%, resulting in Advance Auto Parts, Inc. (NYSE:AAP) ranking among the worst affordable stocks to buy right now.

However, management has been constantly working towards making changes to improve its profitability. It has placed greater emphasis on the ongoing Advance blended box initiative, which aims to improve operational efficiency and sales of the company.

During the second quarter of 2024, the company announced the sale of Worldpac for $1.5 billion, leading to a stronger balance sheet and an indication of management’s focus on the profitable segment only.

Investors are looking forward to the strategic measures paying off for the company. Institutional investors have kept their holdings steady for the first two quarters of 2024. Advance Auto Parts, Inc. (NYSE:AAP) was held by 39 hedge funds in Q2 2024, with total stakes worth $653.03 million. Third Point is the top shareholder of the company with a position worth $94.6 million.

Moreover, AAP is also undervalued at current levels because it is trading at 19 times its forward earnings while the market average is at 23. Analysts also expect its earnings to grow by 336.00% this year to reach $2.18.

Cove Street Capital Small Cap Value Fund stated the following regarding Advance Auto Parts, Inc. (NYSE:AAP) in its Q2 2024 investor letter:

“We have three new more material positions added in the quarter. Advance Auto Parts, Inc. (NYSE:AAP) is the third wheel in a very profitable industry of retail/commercial selling of replacement auto parts. Autozone and O’Reilly have shown how to do this well whereas AAP has shown how NOT to. We think new management, a new Board, and a fiendishly simple strategic plan is a path toward a double in the stock price. We consider the downside here to be boredom if the “fiendishly simple” part proves to be more durable than we anticipate.”