Shares of Advance Auto Parts (AAP +0.21%) shifted into reverse after its earnings report on Feb. 13. The stock fell 1.5% going into the weekend. While the auto parts company has seen its stock price leap over 40% so far this year, it's still down a long way from its all-time high of $241.91, set in 2021.
The automotive parts supplier's comeback appears to be gaining momentum. Advance operates 4,305 stores, primarily within the United States, with additional locations in Canada, Puerto Rico, and the U.S. Virgin Islands. It also services 809 independently owned Carquest stores in the U.S., Mexico, and the Caribbean.
Here are three reasons why Advance may be a buy now.
1. Continued improvement in finances
The company reported overall fourth-quarter sales of $1.97 billion, down from $1.99 billion in the same period a year ago. However, comparable-store sales were up 1.1% year over year, the third consecutive quarter of improved same-store sales. Advance also reported earnings per share (EPS) of $0.50, after an EPS loss of $10.20 in Q4 2024.
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The company provided 2026 guidance. It's expecting sales of $8.485 billion to $8.575 billion, representing growth of 1% to 2%, and an adjusted operating income margin of 3.8% to 4.5%, compared to a loss of 0.5% in 2025.
The key for Advance is that it has closed some of its more unprofitable locations. It's focusing more on larger hub stores that have higher margins and allow for a more organized supply chain. It said it expects to open 40 to 45 stores this year, with 10 to 15 of them as hub locations.
In 2025, it closed more than 500 corporate stores and 200 independent locations, saving it roughly $70 million in annual operating costs.
2. Rising car prices benefit the auto parts industry
The typical new car costs $50,326 in the U.S., as of this past December. That makes new cars less affordable than ever, which is driving up the cost of used vehicles. The average U.S. used car went for $26,043 in December, according to Kelley Blue Book. Those prices are leading potential car buyers to hold on to their current vehicles longer.
The trade-off of retaining vehicles for longer is higher repair costs. This leads to more do-it-yourself repairs and more work for service technicians, both of which drive more auto parts sales. That's why competitors O'Reilly Automotive, AutoZone, and Genuine Parts have all seen their shares rise between 5% and nearly 20% so far this year.
NYSE: AAP
Key Data Points
3. The stock is competitively priced
Compared to its competitors, Advance Auto Parts is still underpriced when you look at its forward price-to-earnings (P/E) and price-to-sales (P/S) ratios. It has a lower forward P/E than all but Genuine Parts, and a lower P/S than all of its major competitors.
Investors can afford to be patient with the company's continued comeback because it has a dependable dividend that, at its current share price, yields roughly 1.7%. The company has paid out a quarterly dividend since 2006.
