What happened

Shares of automotive retail company O'Reilly Automotive (ORLY -0.60%) jumped 19% in October, according to data provided by S&P Global Market Intelligence. The S&P 500 was up about 8%, so O'Reilly drifted higher early in the month thanks to general strength in the market. However, late in the month, the company reported financial results that sent the stock soaring to an all-time high.

So what

As the chart below shows, O'Reilly stock was a market performer for most of October. But that changed on Oct. 26 when it reported financial results for the third quarter of 2022.

In Q3, O'Reilly generated sales of $3.8 billion, up 9% year over year. These top-line results were boosted by strong same-store sales (SSS) growth of 7.6%. This was only slightly better than the 6.2% SSS growth that competitor Autozone posted for a similar time period. But it was strong growth nonetheless.

O'Reilly's SSS growth in Q3 was cited by UBS analyst Michael Lasser when he raised his price target for the stock by 10% to $940 per share, according to The Fly. It's worth noting that this is now the highest price target for O'Reilly stock among major analysts.

Indeed, SSS is an important metric for a retail stock like O'Reilly. The company has opened 154 new locations on a net basis so far in 2022; it plans to open about 26 more in the upcoming fourth quarter and an additional 180 to 190 in 2023. When existing stores are growing sales, it's a strong suggestion that there's demand for these new stores. That's true of O'Reilly, and these new stores are its primary growth vehicle.

Now what

O'Reilly can continue to modestly grow its revenue with SSS growth and by opening new stores. But earnings-per-share (EPS) growth tends to be the larger driver for a stock over a long period of time. And O'Reilly can grow EPS at a higher rate than revenue for one simple reason: share repurchases.

ORLY Chart

ORLY data by YCharts

By reducing its share count steadily over the past decade, O'Reilly has grown EPS faster than it otherwise could have and is a market-crushing investment over this time. This dynamic was still in play during Q3, with management repurchasing 1 million shares. The company paid an average of $683.09 per share -- about 17% lower than where the stock trades as of this writing. So far, that's looking like $710 million well spent.

After O'Reilly's Q3 ended, it used another $161 million to repurchase shares. And it still had $483 million more at its disposal. It will soon run out of authorization at this rate. Therefore, investors will be watching in Q4 because management will likely announce a new share repurchase plan.

There's no reason to believe management won't keep returning capital to shareholders. However, the size of any new repurchase plan could go a long way in determining how much it can grow its EPS in coming years.