AutoZone, Inc. (AZO), O’Reilly Automotive Inc (ORLY) & The Pep Boys – Manny, Moe & Jack (PBY): Harsh Winter, Springing Gains

Another way may be to go long in The Pep Boys – Manny, Moe & Jack (NYSE:PBY) – a company with stores that cater to both ‘do it for me’ and ‘do-it-yourself’ customers. Fresh after a recent correction, the stock has enough momentum on its side to scale new heights.

Unlike AutoZone and O’Reilly Automotive Inc (NASDAQ:ORLY), it has yet to come up with its financial results for the first quarter. The stock is on a rebounding trail after AutoZone, Inc. (NYSE:AZO)’s bullish results and looks set to make the most of the opportunity. Even though the company has a less profitable operating structure, there is a hope of interest costs coming down due to a recent debt restructuring.

At the same time, management is following a customer-focused strategy, which has yet to be reflected in the company’s results. All things put together, The Pep Boys – Manny, Moe & Jack (NYSE:PBY) appears to be a dark horse which has enough scope for a turnaround. It may be risky compared to its peers, but conditions are just right for a financial turnaround. At a forward price-to-earnings ratio of 17.2 and a debt-to-equity ratio of approximately 0.4, The Pep Boys – Manny, Moe & Jack (NYSE:PBY) appears to be a worthy bet.

Foolish bottom line

Overall, the bullishness in the sector is not devoid of reason, and there are good chances of the earnings growth extending to the second-quarter results as well. Improving fundamentals and a reasonable valuation makes these stocks worth a second look.

Jacob 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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