Advance Auto Parts Inc. (AAP)

FairStock Score: 26/100 — RISKY

Key Financials

Strengths

• Established organization with 28,274 employees providing operational scale

Concerns

• Trades significantly above Graham Number ($31) with negative 92% margin of safety—limited downside protection
• High leverage at 2.57x debt-to-equity increases financial risk and interest expense burden
• Revenue declining at 1.1% year-over-year signals potential demand weakness or market share loss
• Altman Z-Score of 1.2 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Advance Auto Parts Inc. is a small-cap consumer cyclical company valued at $3.5 billion. The business generates $8.6 billion in annual revenue with a 0.1% net margin. From a quality standpoint, Advance shows solid Piotroski F-Score of 6/9 and distressed Altman Z-Score of 1.2 warrants caution. On valuation, the stock is commanding a steep 51.5x multiple, with trades above its Graham Number with a negative 92% margin. Growth dynamics show revenue growing at -1.1% and profit growth of 101.5%. The 1.7% dividend yield adds an income component for patient holders. Our composite FairStock Score of 26/100 reflects below-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. Operational leverage in the business model means incremental revenue growth could disproportionately boost bottom-line profitability.

Bear Case

At 51x earnings, any growth disappointment triggers rapid multiple compression—a 20% earnings miss plus multiple contraction to 20x implies 40%+ downside. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer