This Auto Parts Business Is Positioned to Advance

The auto parts industry is a good one these days, and Advance Auto Parts (AAP 1.93%) is one of its leading retail players. Advance Auto Parts continues to push its 52-week high as the company enjoys strong earnings and healthy margins, even if top-line sales aren't that impressive. With a recent major acquisition under its belt, it is set up for an even greater national footprint and an increased ability to capitalize on the industry's tailwinds. Both the commercial and the do-it-yourself space seem to be thriving, and few companies can top Advance Auto Parts' position in the landscape. Here's why the stock may still be a buy today.

Vroom!
All markets saw sales gains sequentially, even though same-store sales only clocked in at a barely-there 0.1%. While adverse weather has adversely affected nearly every business imaginable, Advance Auto Parts is one of the few that wins from the unfortunate weather. In fact, management cites the weather as a main reason that the company was able to post positive same-store sales gains in an otherwise bleak marketplace. Batteries and wiper blades sold the best.

Advance Auto Parts benefits from a historically high average age for vehicles in the United States. Deferred maintenance on these aging vehicles reached a record level in 2013, and 2014 may see a continued trend.

New store growth remains robust. Throughout last year, the company opened 172 stores under its names.

The biggest move for the company is the aforementioned acquisition. It bought General Parts in 2013 and closed on the deal in 2014 for a price of roughly $2 billion in cash. General Parts was a crucial move in Advance Auto Parts' strategy to increase its commercial segment, which includes the use of mechanics and vehicle bays. As vehicles become more and more complex, the average owner is less able to accomplish do-it-yourself procedures. The commercial segment is quickly taking over DIY as the majority of Advance Auto Parts' business and sales.

Duopoly
The company's biggest competitor is AutoZone -- the industry leader by sales and market cap. AutoZone holds a market value roughly twice that of Advance Auto Parts, but the latter is quickly closing the gap with its General Parts acquisition. AutoZone's retail footprint may be superior, but Advance Auto Parts is now the leading auto parts provider on the continent.

Investors have not yet seen what a fully integrated Advance Auto Parts will look like. The General Parts assimilation has just begun and will be a multiyear endeavor.

Both companies trade at roughly 15.5 times forward earnings, while Advance Auto trades at a slight discount on an EV/EBITDA basis. Industry tailwinds will carry both higher in the coming years, but at this point Advance Auto appears to have the edge of being the smaller business with a greater growth runway. With General Parts under its belt, investors interested in reasonably priced growth should take close notice.