BOSTON ( TheStreet) -- The stock-market swoon and boom of the past two years has touched every industry. One niche, however, has outperformed amid turbulence: auto-parts stocks.

Car-parts shares tend to rise in line with stock-market indices on up days, but also gain on down days because of perceived safety.

Since 2007, Monro Muffler Brake ( MNRO), O'Reilly Auto Parts ( ORLY) and AutoZone ( AZO) have delivered ample returns and outstanding hedges in investors' portfolios.

Group laggard Advance Auto Parts ( AAP) is currently the best pick. As depicted in the chart above, the company has trailed comparably sized peers over one and three years. But in the latest selloff, beginning April 23, it assumed leadership. Advance Auto Parts has gained 16% during the past three months as the S&P 500 Index has tumbled 8.2%. TheStreet's equity model, which evaluates stocks conservatively, rates Advance Auto Parts "buy."

The company's first-quarter net income increased 17% to $109 million, and earnings per share expanded 21% to $1.19. Revenue grew 8.7% to $1.8 billion. The operating margin inched up from 9.4% to 9.9%. The company posted a comparable-store sales increase of 7.7%, a sign of strong retail demand. The cash balance nearly tripled from the year-earlier tally to $133 million. Advance Auto Parts has $297 million of debt, translating to a debt-to-equity ratio of 0.3.

Advance Auto Parts has opened 57 stores during the past 12 months, capitalizing on elevated demand for aftermarket auto parts, a recessionary trend that has lasted longer than analysts expected. The company's quarterly return on capital widened from 15% to 16%, and its return on equity, a key measure of profitability for stock investors, rose from 21% to 26%, exceeding the specialty retail industry average of 17%.

Despite impressive fundamentals, Advance Auto Parts is a reasonably priced stock. It trades at a price-to-projected-earnings ratio of 12 and a price-to-cash-flow ratio of 6.1, 18% and 42% discounts to industry averages. Its PEG ratio, a measure of value relative to projected long-term growth, of 0.6 reflects a 40% discount to estimated fair value and a 45% discount to the industry average, emitting a buy signal to long-term investors.

Advance's relative position is confirmed by sell-side analysts who expect it to outperform the stock market over a one-year period. Of researchers following the stock, 15, or 63%, rate it "buy," eight rate it "hold" and one ranks it "sell." Raymond James ( RJF) offers a target of $60, leaving a potential return of 22%. JPMorgan ( JPM) expects the stock to gain 16% to $57. Goldman Sachs ( GS) forecasts that the shares will rise another 14% to $56.

-- Reported by Jake Lynch in Boston.


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