Back in October of last year, I took a look at the investment prospects for Advance Auto Parts, (NYSE: AAP) stock. The investment case for buying the stock rests on the successful integration of General Parts International, a deal that results in Advance Auto becoming the largest auto parts retailer in the U.S.
With the stock up more than 25% since October, I thought it would be time to update investors on progress with the integration. Is it going smoothly enough to justify the stock price move?
Valuation discount?
As you can see in the following chart, the company's valuation discount has closed thanks to the recent run-up in the stock. Incidentally, I'm using enterprise value (market cap plus net debt) to earnings before interest tax depreciation and amortization as a benchmark because it's the most commonly used metric in takeover activity.
AAP EV to EBITDA (Forward) data by YCharts.
Of course, a large part of the assumptions made over future EBITDA are made on the basis of the benefits of the General Parts International acquisition. With that said, let's look at a slideshow to see how the integration is faring according to the plan and whether the stock's risk/reward profile is still attractive.
