Is O’Reilly Automotive Inc (ORLY) a Buy After Being Revved Up?

IBISWorld estimates the auto parts to be a $40 billion industry, in which AutoZone is the market share leader:

AutoZone is cheaper than O’Reilly:

Although AutoZone isn’t the cheapest auto parts retailer in the industry, it doesn’t have to be, as AutoZone has some of the best returns and profitability in the industry:

Don’t be fooled

The overwhelming positive for the industry is the rising age of cars on the road, which has reached 11 years. The large number of ‘old’ cars should continue to drive the demand for auto parts and services. So which auto parts company is the best buy? Although AutoZone is not the cheapest in the industry, it is one of the best with regards to profitability and return generation, not to mention cheaper than O’Reilly. AutoZone’s price to earnings ratio of 12.5 is also on the low-end of its 5-year range (low of 10.6 to high of 18.6). Investor’s don’t have to completely rule out O’Reilly, as it may well be one of the top five picks for 2013 (check out all five). Billionaire Jim Simons also took a new position in O’Reilly during the third quarter (check out Simon’s top picks), but I continue to like AutoZone better.

The article Is O’Reilly a Buy After Being Revved Up? originally appeared on Fool.com and is written by Marshall Hargrave.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.