One sector that has not only remained pretty much untouched by the recession but even profited from it is aftermarket and auto-parts retailers. Aftermarket retailers have benefited as consumers have chosen to stick to their older vehicles rather than buy new ones in an uncertain economic environment.

One such retailer, O'Reilly Automotive (Nasdaq: ORLY), recently reported a 34% jump in its second-quarter profits helped by these factors. The earnings boost helped it raise its annual outlook. In this article, let us take a closer look at whether O'Reilly deserves space in our portfolio.

Numbers matter
O'Reilly has had a strong start to the year even as the economic gloom has persisted. And the bullish start has made management confident about carrying this performance forward. Indeed, the company is working toward achieving that objective. It has opened 99 stores this fiscal year, taking its total store count up to 3,657, and it plans to open even more stores before the fiscal year is out. These stores should add to O'Reilly's top line going forward.

In the last 12 months, the Missouri-based company's revenues have surged to $5.59 billion from $5.09 billion, up 10%. At the same time, it has improved its operational efficiency. The operating margin grew to 14.1% from 12.6% in the span of a year. I expect these numbers to keep improving going forward, especially as new store openings add to overall sales.

The price is right
Let's take a look at how the company is valued when compared with its industry peers.


Trailing P/E

Forward P/E (NTM)


O'Reilly 21.3 17.7 2.9
Advance Auto Parts (NYSE: AAP) 13.5 11.6 5.8
AutoZone (NYSE: AZO) 17.4 14.1 NM
Pep Boys (NYSE: PBY) 12.0 11.3 1.0
Dana Holding (NYSE: DAN) 38.3 5.5 1.4
Genuine Parts (NYSE: GPC) 14.6 13.5 2.6

Source: Capital IQ, a division of Standard & Poor's. NTM = next 12 months. NM = not meaningful.

O'Reilly has the highest trailing P/E in the list, but this is mainly because the market has probably factored in its run of good performance and its growth potential. Going forward, it has a lower P/E, thus it may be a good time to enter the stock.

Based on these numbers, Pep Boys could also be interesting. It's expected to have a pretty strong year, yet it seems attractively priced with a P/E of 12.0.

If you think O'Reilly or any other stock mentioned above is worth taking a look at, click here to add it to your stock watchlist so you can stay up to date on all the news and analysis on the stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.