Genuine Parts Stock To $76?

Genuine Parts (GPC) stock has fallen 26% during the past month, and is currently trading at $108.96. Our multi-factor assessment suggests that it may be time to sell GPC stock. We have, overall, a pessimistic view of the stock, and a price of $76 may not be out of reach. We believe there are several things to fear in GPC stock given its overall Weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s Moderate valuation which is why we think it is Unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $15 Bil in market cap, Genuine Parts provides automotive and industrial replacement parts for a wide range of vehicles, including hybrid and electric, trucks, motorcycles, farm, marine, and small engine equipment.

[1] Valuation Looks Moderate

This table highlights how GPC is valued vs broader market. For more details see: GPC Valuation Ratios

[2] Growth Is Weak

• Genuine Parts has seen its top line grow at an average rate of 3.2% over the last 3 years
• Its revenues have grown 3.5% from $23 Bil to $24 Bil in the last 12 months
• Also, its quarterly revenues grew 4.1% to $6.0 Bil in the most recent quarter from $5.8 Bil a year ago.

This table highlights how GPC is growing vs broader market. For more details see: GPC Revenue Comparison

[3] Profitability Appears Very Weak

• GPC last 12 month operating income was $1.2 Bil representing operating margin of 5.0%
• With cash flow margin of 3.7%, it generated nearly $891 Mil in operating cash flow over this period
• For the same period, GPC generated nearly $66 Mil in net income, suggesting net margin of about 0.3%

This table highlights how GPC profitability vs broader market. For more details see: GPC Operating Income Comparison

[4] Financial Stability Looks Moderate

• GPC Debt was $6.5 Bil at the end of the most recent quarter, while its current Market Cap is $15 Bil. This implies Debt-to-Equity Ratio of 43.2%
• GPC Cash (including cash equivalents) makes up $477 Mil of $21 Bil in total Assets. This yields a Cash-to-Assets Ratio of 2.3%

[5] Downturn Resilience Is Weak

GPC has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• GPC stock fell 32.1% from a high of $187.28 on 2 December 2022 to $127.12 on 27 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $163.38 on 23 April 2024 , and currently trades at $108.96

 
2020 Covid Pandemic

• GPC stock fell 52.7% from a high of $106.23 on 1 January 2020 to $50.29 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 12 January 2021

 
2008 Global Financial Crisis

• GPC stock fell 50.8% from a high of $50.91 on 19 September 2007 to $25.06 on 9 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 December 2010

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read GPC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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