It doesn't operate at the cutting edge of an exciting technological breakthrough. And it isn't impressing investors with rapid growth or disruptive innovation.
However, O'Reilly Automotive (ORLY 0.95%) deserves the respect of the investment community. It is a leader in the aftermarket auto parts industry. And shares have performed exceptionally well in the past.
In 2025, this retail stock climbed 15.4%, just slightly trailing the S&P 500's 16.4% return. So, where will O'Reilly shares be exactly one year from now?
Image source: Getty Images.
Forecasting macro conditions is a waste of time
Investors should spend no time trying to forecast how the economy at large will do in 2026. That's because this business has proven that it can perform well in any kind of environment. It all comes down to durable demand, something any company would love to have.
In robust economic times, consumers will likely drive more, increasing wear and tear on their vehicles. This supports demand for the products that O'Reilly sells. And in economic downturns, consumers will decide to delay buying new vehicles. Instead, they'll invest in maintaining their existing cars. Again, this benefits O'Reilly.
This is evident in the company's same-store sales (SSS) trend. 2025 is set to be O'Reilly's 33rd straight of reporting positive SSS growth, an unbelievable streak. There's no reason to believe this won't continue in 2026.
Besides increasing SSS, opening new stores is what drives growth for the business. Management plans to end 2025 having opened 200 to 210 net new locations. This industry is fragmented, which gives O'Reilly a sizable runway to keep expanding. Executives are looking to open 230 locations (at the midpoint) in 2026.
Expect more stock buybacks
Because of O'Reilly's impressive financial performance, regardless of macro conditions, the business is consistently profitable. In fact, net income has increased at a compound annual rate of 11.9% between 2014 and 2024, a noteworthy trend. There is virtually no risk that the company is going to all of a sudden start losing money.
Besides investing in maintaining its current operations and expanding its retail footprint, ongoing profits give management the ability to focus aggressively on a particular capital allocation strategy. O'Reilly doesn't pay a dividend. However, it continuously implements share repurchases. In the first nine months of 2025, the business spent $1.6 billion buying back its own stock. And in the last decade, the diluted outstanding share count was reduced by 44%.
Looking ahead to the next 12 months, this trend is set to continue. Death, taxes, and O'Reilly repurchasing its shares -- these are all certain outcomes.
NASDAQ: ORLY
Key Data Points
O'Reilly stock's valuation is a wild card
O'Reilly earnings have grown tremendously, as mentioned. And this can be a fantastic driver of investor returns. I don't believe this trend is going to change going forward. The consensus view among Wall Street analysts is that O'Reilly's earnings per share will increase 8.8% in 2025 and 11.4% in 2026.
Investors would have loved to own this business over the years. Since late 2020, O'Reilly shares have risen by 201%, significantly outperforming the S&P 500. But it's worth mentioning that the stock has benefited from a powerful tailwind in the form of valuation expansion. The price-to-earnings (P/E) ratio increased by 56% during that time, and it currently sits at a still-expensive multiple of 31.7.
While earnings are set to continue growing, it's anyone's guess how market sentiment will shift over the next 12 months. This can have a profound impact on investor returns, as valuation contraction can overpower profit growth. In the past decade, to be fair, there has only been one year (in 2017) that O'Reilly stock declined. I'd bet that shares end 2026 with a positive gain, but accurately predicting the exact return is an impossible task.
