The auto parts and automotive maintenance industry is about as tough as a NASCAR race at Richmond. With a host of competitors trying to take the checkered flag of the lucrative oil-change market, it's amazing that Monro Muffler Brake
With the instant variety coming from the likes of Jiffy Lube, a wholly owned subsidiary of Royal Dutch
Auto parts just don't do it for you? That's too bad, because Monro's stock has increased sixfold since 2000. This hotrod investment has been flooring the accelerator for years now, and the latest quarterly figures suggest the company isn't hitting the brakes anytime soon.
Monro finished strong in fiscal 2005, and it's looking good at the start of fiscal 2006. For the first quarter, revenues increased to a record $94.6 million, up 8.3% from the same period a year ago. Comparable same-store sales have increased 1.7% as the company continues to highlight strength from its oil-change service. New stores contributed $7 million to top-line growth.
Fortunately, Monro isn't sacrificing profit levels for growth. Its gross and operating margins continued to improve, resulting in a 13.2% increase in net income to a quarterly record of $7.7 million.
If there is one area where I'd like to see further improvements, it's the balance sheet. With a mere $3.6 million in cash and equivalents and $47.3 million in long-term debt, the company is handcuffed a bit when it comes to flexibility. Valuation remains another concern. The company is comfortable with estimates of $1.52 to $1.60 in earnings per share (EPS) for fiscal 2006, which means that at the recent stock price, it is currently trading at a forward P/E of about 19. Given the realized growth rates investors are seeing so far, $30 is no bargain for a share of Monro.
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Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.