AutoZone, Inc. (AZO), O’Reilly Automotive Inc (ORLY), Advance Auto Parts, Inc. (AAP): 3 Stocks to Take Advantage of an Auto Rebound

Lastly

Advance Auto Parts, Inc. (NYSE:AAP) is a major retailer of auto parts operating in the United States. It trades with a P/E ratio around 16.2, well below the industry average. Although its revenues increased 2% to $2.0 billion, in the latest quarter, its net income decreased by 9% to $122 million. Its cash from operations declined from $235 million to $135 million, and its free cash flow declined from $153 million to $72 million.  These reductions in operating performance were due to some short term weaknesses that should be fixed in the coming quarters.

On the positive side, Advance Auto Parts, Inc. (NYSE:AAP) is strengthening its e-commerce business and improving its commercial business. Its balance sheet carries the least amount of debt from the three companies discussed here, as it has a debt to equity ratio of 0.49.

It operates 3,700 stores mostly located on the east coast of the United States, so there is potential for expansion. Lastly, it’s improving its profit margin, and although it is lower than AutoZone, Inc. (NYSE:AZO)’s, the 8% improvement over the last few years is nothing to sneeze at.

The foolish conclusion

If you’re looking at the auto industry, AutoZone, Inc. (NYSE:AZO), O’Reilly Automotive Inc (NASDAQ:ORLY), and Advance Auto Parts, Inc. (NYSE:AAP) should be considered . All 3 offer interesting valuations and still have room for growth.  As the auto business continues to rebound, aftermarket auto parts should also do well.  These downstream plays may be perfect for those who wish to avoid the big automotive manufactures.

The article 3 Stocks to Take Advantage of an Auto Rebound originally appeared on Fool.com.

Robinson Roacho has no position in any stocks mentioned. The Motley Fool owns shares of O’Reilly Automotive. Robinson is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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