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Genuine Parts: Genuinely Fully Valued

Stocks in this article: GPC

NEW YORK ( F.A.S.T. Graphs) -- Do you know Genuine Parts Company (GPC)?

Founded in 1928, it's in the business of distributing automotive, industrial, office and electrical parts. With a network of over 2,000 operations, Genuine Parts Company spans the geography of North America. On the automotive front, you would likely recognize Genuine Parts by its subsidy Napa, which distributes over 380,000 products in the U.S. alone.

Within this segment -- which constitutes roughly half of its business -- Genuine Parts enjoys a massive scale advantage because it has a far greater amount of distribution centers than its competitors. With this benefit, Genuine Parts is able to provide parts at a quicker and more efficient pace.

In addition, the company enjoys a bit of a moat from diversifying its business. The industrial, office and electrical components operate under the names Motion Industries, S.P. Richards and EIS, which collectively make up the other half of the business. These businesses operate under a similar model as the automotive segment and provide a range of market exposures.

From this protected business model, Genuine Parts has put together an enviable track record. For instance, the company has not only paid but also increased its dividend for 57 straight years, the fifth longest such streak among businesses today. Further, Genuine Parts pays out about 50% of its profits in the form of dividends and has increased this payout by a rate of about 6% per year for the last decade. At the same time, the common shares outstanding have been decreasing by about 1% per annum as well.

Thus with these strong operating statistics, it's no surprise that TheStreet.com's Jim Cramer had this to say about the company recently on Mad Money: "It is a very good, consistent player."

I would largely agree with Cramer that the company has proven itself to be a very consistent and rewarding company. Yet, I think it's useful to observe this view in the lens of current valuation and history while simultaneously turning an eye towards the future. For this I use the Fundamentals Analyzer Software Tool of F.A.S.T. Graphs.

Below I have included a 15-year Earnings and Price Correlated Graph representing the price and operating history of the company. We can see that operating earnings (orange line) have grown by 5.6% per year while the dividend (pink line) has grown from $1.08 to an expected payout of $2.33. Further, notice that the normal P/E (blue line) has been 16 while the current price-to-earnings ratio is 19.2.


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