Linked here’s a detailed quantitative evaluation of Genuine Parts Company (GPC). Beneath are some highlights from the above linked evaluation:
Firm Description: Real Elements Co. is a number one wholesale distributor of automotive alternative elements, industrial elements and provides, and workplace merchandise.
Fair Value: In calculating honest worth, I contemplate the NPV MMA Differential Honest Worth together with these 4 calculations of honest worth, see web page 2 of the linked PDF for an in depth description:
1. Avg. Excessive Yield Value
2. 20-Yr DCF Value
3. Avg. P/E Value
4. Graham Quantity
GPC is buying and selling at a premium to all 4 valuations above. Since GPC’s tangible e-book worth will not be significant, a Graham quantity can’t be calculated. When additionally contemplating the NPV MMA Differential, the inventory is buying and selling at a 65.6% premium to its calculated honest worth of $90.1. GPC didn’t earn any Stars on this part.
Dividend Analytical Data: On this part there are three potential Stars and three key metrics, see web page 2 of the linked PDF for an in depth description:
1. Free Money Stream Payout
2. Debt To Whole Capital
3. Key Metrics
4. Dividend Progress Fee
5. Years of Div. Progress
6. Rolling 4-yr Div. > 15%
GPC earned no Stars on this part. The corporate has paid a money dividend to shareholders yearly since 1948 and has elevated its dividend funds for 68 consecutive years.
Dividend Income vs. MMA: Why would you assume the fairness threat and spend money on a dividend inventory in the event you may earn a greater return in a a lot much less dangerous cash market account (MMA) or Treasury bond? This part compares the incomes skill of this inventory with a high yield MMA. Two gadgets are thought of on this part, see web page 2 of the linked PDF for an in depth description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $167 is beneath the $500 goal I search for in a inventory that has elevated dividends so long as GPC has. If GPC grows its dividend at 5.3% per 12 months, it would take 8 years to equal a MMA yielding an estimated 20-year common fee of three.75%.
Friends: The corporate’s peer group consists of: Advance Auto Elements Inc. (AAP) with a 1.4% yield, AutoZone Inc. (AZO) with a 0.0% yield and W.W. Grainger, Inc. (GWW) with a 0.8% yield.
Conclusion: GPC didn’t earn any Stars within the Honest Worth part, didn’t earn any Stars within the Dividend Analytical Knowledge part and didn’t earn any Stars within the Dividend Earnings vs. MMA part for a complete of zero Star. This quantitatively ranks GPC as a 0-Star Keep away from inventory.
Utilizing my D4L-PreScreen.xls mannequin, I made up my mind the share value would want to lower to $120.33 earlier than GPC’s NPV MMA Differential elevated to the $500 minimal that I search for in a inventory with 68 years of consecutive dividend will increase. At that value the inventory would yield 3.3%.
Resetting the D4L-PreScreen.xls mannequin and fixing for the dividend progress fee wanted to generate the goal $500 NPV MMA Differential, the calculated fee is 7.4%. This dividend progress fee is above the 5.3% used on this evaluation, thus offering no margin of security. GPC has a risk rating of 1.75 which classifies it as a Medium threat inventory.
GPC’s lengthy string of dividend will increase are supported by its sturdy underlying fundamentals of gross sales, earnings and free money circulate. From an working standpoint, GPC has an intensive distribution community and it has constructed a loyal buyer following over time. The corporate maintains wide-ranging inventories and effectively delivers merchandise in minimal time. Lengthy-term prospects for the corporate’s auto elements phase ought to enhance with the rising quantity and growing complexity of automobiles, together with the next medium automobile age.
The corporate has good financials, secure earnings and an above-average dividend yield for its business. GPC is certainly one of my bigger holdings, with a lot of its worth coming via capital appreciation. With a Free Money Stream Payout of 61% (up from 48%) and a Debt to Whole Capital of 53% (up from 52%) its dividend will not be solely sustainable, however has room to develop. It’s at present buying and selling at a 65.6% premium to my calculated honest worth of $90.10. I’ll watch for its value to come back down and its dividend metrics to enhance earlier than including to my place.
Disclaimer: Materials offered right here is for informational functions solely. The above quantitative inventory evaluation, together with the Star score, is mechanically calculated and relies on historic data. The evaluation assumes the inventory will carry out sooner or later because it has prior to now. That is typically by no means true. Earlier than shopping for or promoting any inventory you ought to do your individual analysis and attain your individual conclusion. See my Disclaimer for extra data.
Full Disclosure: On the time of this writing, I used to be lengthy in GPC (3.7% of my Dividend Progress Portfolio).
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Tags: GPC, AAP, AZO, GWW,
