[ad_1]
Speaking of great stocks, you’re probably thinking of “Magnificent Seven“Technology-focused, innovative companies come to mind, and their gains over the past decade have certainly been impressive.
But there are two lesser-known and arguably more boring companies that also dominate the market.what i’m talking about is o’reilly automotive (NASDAQ:Orly) and autozone (NYSE:AZO). The former has seen him rise 678% over the past 10 years, while the latter has risen 498% during this time.
Should you buy these two things that are skyrocketing? retail stocks Will $100 last me beyond 2024?
steadily win the race
When it comes to excitement and disruptive potential, these businesses can’t win any awards. They are exactly the opposite. But for investors, being boring is clearly an advantage.
O’Reilly and AutoZone sell aftermarket auto parts and supplies to both DIY and commercial customers through a network of thousands of stores. These companies grow by selling to consumers whose cars are past their manufacturer’s warranty, so details about aftermarket parts are very important. The average age of vehicles on the road is slowly rising over the years, and so are the miles driven, so there’s a lot of demand out there.
Basically, these businesses do better when their cars have more wear and tear. It is of utmost importance for people to have a working car to manage their daily life, whether it is running errands, dropping off and picking up children from school, or going to work. This has made both O’Reilly and AutoZone somewhat recession-proof.
This is a great quality to have in the stocks you own because you don’t have to predict what the economy will do next. The company in question will do well no matter what.
capital return
These companies can generate large profits and cash because of stable demand trends regardless of the economic environment. O’Reilly and AutoZone generated free cash flow of $2 billion and $2.1 billion, respectively, last fiscal year. This is a true sign of a financially healthy company.
Neither business pays dividends. However, both management teams are very proactive when it comes to stock buybacks. Over the past five years alone, amid a variety of disruptions including the pandemic, supply chain bottlenecks, inflationary pressures and rising interest rates, O’Reilly’s stock has declined by 26% and AutoZone’s stock has declined by 30%.
For existing investors, this is a financial boon as it boosts earnings per share. If nothing is done, shareholder ownership will increase over time. That’s a powerful development.
What’s encouraging is that this attractive capital return policy comes after management reinvests in its growth initiatives. Stock buybacks are carried out every year after opening new stores and logistics facilities. That should lead to even greater profits and profits over time.
Is the price reasonable?
With the overall market in record territory, it’s probably no surprise that both O’Reilly and AutoZone are near all-time highs. Like the underlying businesses, these stocks continue to generate returns for investors.
This means it is not necessarily trading at a bargain price.in price vs. revenue On a (P/E) basis, both stocks are selling at their highest levels in the past 10 years. As a result, these boring businesses seem to have caught the market’s attention, and investors are becoming incredibly optimistic about their prospects.
It’s important to ask yourself how much weight you place on evaluation. Of course, things would be better off if O’Reilly and AutoZone traded at lower P/E ratios. But what benefits would be sacrificed by sitting on the sidelines? I think your best bet is to simply invest $50 in each of these stocks and hold them for the long term.
Should you invest $1,000 in AutoZone now?
Before buying stocks at AutoZone, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Things investors can buy right now…and AutoZone wasn’t among them. These 10 stocks have the potential to generate impressive returns over the next few years.
stock advisor We provide investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks every month.of stock advisor Since 2002, the service has more than tripled S&P 500 returns*.
See 10 stocks
*Stock Advisor returns as of March 21, 2024
Neil Patel and his clients have no positions in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
These two great stocks have soared in the past. Is it time to buy now for $100 and hold onto it until 2024 (and beyond)?Originally published by The Motley Fool
[ad_2]
Source link
