NEW YORK (TheStreet) -- Advance Auto Parts (AAP) stock is advancing 5.63% to $155.92 on heavy trading volume on Tuesday afternoon following reports that the company is exploring a sale, sources told StreetInsider.
At least one potential buyer has approached the auto parts retailer, which could be sold for up to $200 per share. The talks are in early stages and may not lead to sale, StreetInsider added.
Analysts said last week that O'Reilly Automotive (ORLY) could seek to acquire one of its competitors, which includes Advance Auto Parts, StreetInsider noted.
Last week, Advance Auto Parts' competitor Pep Boys - Manny, Moe & Jack (PBY) received a higher bid from Bridgestone Corp. (BRDCY) that values the company at about $863 million.
So far today, 5.14 million shares of Advanced Auto Parts have been traded, compared with its average daily volume of 1.04 million shares.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate ADVANCE AUTO PARTS INC as a Buy with a ratings score of A-. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 4.3%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- ADVANCE AUTO PARTS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ADVANCE AUTO PARTS INC increased its bottom line by earning $6.71 versus $5.33 in the prior year. This year, the market expects an improvement in earnings ($7.85 versus $6.71).
- The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.
- 47.67% is the gross profit margin for ADVANCE AUTO PARTS INC which we consider to be strong. Regardless of AAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.24% trails the industry average.
- You can view the full analysis from the report here: AAP