Critical Review: Advance Auto Parts (NYSE:AAP) & Genuine Parts (NYSE:GPC)

Advance Auto Parts (NYSE:AAP) and Genuine Parts (NYSE:GPC) are both retail/wholesale companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, earnings, dividends, risk, analyst recommendations and institutional ownership.

Earnings and Valuation

This table compares Advance Auto Parts and Genuine Parts”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Advance Auto Parts	$8.91 billion	0.36	-$335.79 million	($5.87)	-9.24
Genuine Parts	$23.57 billion	0.74	$904.08 million	$6.09	20.61

Genuine Parts has higher revenue and earnings than Advance Auto Parts. Advance Auto Parts is trading at a lower price-to-earnings ratio than Genuine Parts, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

88.8% of Advance Auto Parts shares are owned by institutional investors. Comparatively, 78.8% of Genuine Parts shares are owned by institutional investors. 0.4% of Advance Auto Parts shares are owned by company insiders. Comparatively, 0.4% of Genuine Parts shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

Advance Auto Parts pays an annual dividend of $1.00 per share and has a dividend yield of 1.8%. Genuine Parts pays an annual dividend of $4.12 per share and has a dividend yield of 3.3%. Advance Auto Parts pays out -17.0% of its earnings in the form of a dividend. Genuine Parts pays out 67.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Advance Auto Parts has raised its dividend for 1 consecutive years and Genuine Parts has raised its dividend for 70 consecutive years. Genuine Parts is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Advance Auto Parts and Genuine Parts, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Advance Auto Parts	2	19	1	0	1.95
Genuine Parts	1	4	3	2	2.60

Advance Auto Parts presently has a consensus target price of $46.53, suggesting a potential downside of 14.21%. Genuine Parts has a consensus target price of $130.86, suggesting a potential upside of 4.28%. Given Genuine Parts’ stronger consensus rating and higher possible upside, analysts clearly believe Genuine Parts is more favorable than Advance Auto Parts.

Profitability

This table compares Advance Auto Parts and Genuine Parts’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Advance Auto Parts	-3.74%	-1.76%	-0.37%
Genuine Parts	3.60%	23.71%	5.48%

Volatility and Risk

Advance Auto Parts has a beta of 1.04, suggesting that its stock price is 4% more volatile than the S&P 500. Comparatively, Genuine Parts has a beta of 0.74, suggesting that its stock price is 26% less volatile than the S&P 500.

Summary

Genuine Parts beats Advance Auto Parts on 15 of the 18 factors compared between the two stocks.

About Advance Auto Parts

Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts. It also offers air conditioning chemicals and accessories; air fresheners; antifreeze and washer fluids; electrical wires and fuses; electronics; floor mats, seat covers, and interior accessories; hand and specialty tools; lighting products; performance parts; sealants, adhesives, and compounds; tire repair accessories; vent shades, mirrors and exterior accessories; washes, waxes and cleaning supplies; and wiper blades. In addition, the company offers air filters; fuel and oil additives; fuel filters; grease and lubricants; motor oils; oil filters, part cleaners and treatments; and transmission fluids for engine maintenance. Further, it offers battery and wiper installation; engine light scanning and checking; electrical system testing, including batteries, starters, and alternators; oil and battery recycling; and loaner tool program services. Additionally, the company sells its products through its website. It serves professional installers and do-it-yourself customers. The company operates stores under the Advance Auto Parts and Carquest names, as well as branches under the Worldpac name. The company has stores in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and independently owned Carquest branded stores in Mexico and various Caribbean Islands. Advance Auto Parts, Inc. was founded in 1929 and is based in Raleigh, North Carolina.

About Genuine Parts

Genuine Parts Company distributes automotive replacement parts, and industrial parts and materials. It operates in two segments: Automotive Parts Group and Industrial Parts Group segments. The company distributes automotive replacement parts for hybrid and electric vehicles, trucks, SUVs, buses, motorcycles, recreational vehicles, farm vehicles, small engines, farm equipment, marine equipment, and heavy duty equipment; and equipment and parts used by repair shops, service stations, fleet operators, automobile and truck dealers, leasing companies, bus and truck lines, mass merchandisers, farms, and individuals. It also distributes industrial replacement parts and related supplies, such as abrasives, adhesives, sealants and tape, bearings, chemicals, cutting tools, electrical, facility maintenance, hose and fittings, hydraulics, janitorial, mechanical power transmission, pneumatics, process pumps and equipment, safety, seals and gaskets, and tools and testing instruments, as well as maintenance, repair, and operation customers in aggregate and cement, automotive, chemical and allied products, equipment and machinery, equipment rental and leasing, fabricated metals, food and beverage, iron and steel, lumber and wood, oil and gas, pulp and paper, and rubber products. In addition, the company provides various services and repairs comprising gearbox and fluid power and process pump assembly and repair, hydraulic drive shaft repair, electrical panel assembly and repair, hose and gasket manufacture and assembly. It operates in the United States, Canada, France, the United Kingdom, Ireland, Germany, Poland, the Netherlands, Belgium, Spain, Portugal, Australia, New Zealand, Mexico, Indonesia, and Singapore. The company was incorporated in 1928 and is headquartered in Atlanta, Georgia.