Genuine Parts (GPC) Stock Analysis

by | Dividend Kings

Genuine Parts (GPC) Logo

Genuine Parts Dividend

Genuine Parts (GPC) has paid a dividend since 1948 and increased its dividend for 65 consecutive years; qualifying the company as a Dividend King, Dividend Aristocrat, and Dividend Champion.

Long term relationships with professional automotive parts clients provide a small moat. GPC is able to provide outstanding value due to fast part availability, convenience of ordering and delivery, and a trusted brand.

Current Dividend Annualized: $3.26

Genuine Parts (GPC) Intrinsic Value – Margin of Safety Analysis            

(updated August 2021)

Normalized Diluted Earnings Per Share (TTM): $5.65
Cash Flow From Operations Per Share (TTM): $12.19
Free Cash Flow Per Share (TTM): $11.02

Estimated Intrinsic Value: $90

Target Buy Price Based on Required Margin of Safety =  $75
(Required Margin of Safety Based On Risk Stability Grade:

A = 10%, B = 20%, C = 30%, D = 40%, F = 50%)

Target SELL Price Based on Estimated Intrinsic Value = $103
(Allow Overvaluation Adjusted by Risk Stability Grade:

A = 20%, B = 15%, C = 10%, D = 5%, F = 0%)

 

Risk / Stability Grade: B

A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.

B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.

C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.

D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.

F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.

 

Financial Risk Grade:  B-

A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.

B grade indicates a very low probability for a dividend cut.

C grade indicates a low probability for a dividend cut and/or average safety risk.

D grade indicates there are issues that should be considered concerning future dividend payments.

F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.

 

Earnings Quality Grade: A

A grade indicates earnings quality is high or far above average.

B grade indicates earnings quality is good and/or above average.

C grade indicates earnings quality is acceptable or average.

D grade indicates earnings quality is poor and requires thoughtful due diligence.

F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.

Earnings Report:  6/30/21

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AAAMP Portfolios Position Disclosures:
Dividend Growth & Income – None
Treasure Trove Twelve – None
Global Dividend Balanced – None
Global Value – None
Global Value Aggressive – None
High Yield – None

Company Description

Sector: Consumer Cyclical
Industry: Specialty Retail

Genuine Parts (GPC) has a distribution network of over 2650 operations far and near, including the United States, Canada, Mexico, the Caribbean, Australia, New Zealand, China, and global emerging markets. The company describes itself as “a service organization” divided into 4 groups:

Automotive Replacement Parts: NAPA Auto Part
(52% of GPC revenues. 6,000+ stores that distribute approximately 450,000 automotive replacement parts, accessory and service items.)

Industrial Replacement Parts: Motion Industries
(30% of GPC revenues, over 6.5 million parts and related supplies including bearings, mechanical power transmission products, industrial and safety supplies, etc.)

Office Products: S.P. Richards
(13% of GPC revenues, over 62,000 items including general office supplies, cleaning and breakroom supplies, disposable food service products, office furniture, school supplies, safety & security items, etc.)

Electrical/Electronic Materials: EIS, Inc:
(5% of GPC revenues, over 100,000 items including wire and cable, insulating and conductive materials, assembly tools, and test equipment.)

SWOT Analysis

Strengths

Genuine Parts is a trusted brand with a large scale distribution system and convenient retail locations. Their reputation for parts availability and fast delivery sets NAPA apart from smaller competitors.

Superior levels of component availability give a huge advantage to GPC. To replicate what the company has built over the decades would require an investment that keeps competitors away (moat).

Weaknesses

In an environment where revenues have only been growing about 5% annually, GPC has to maintain its competitive advantages to prevent erosion of earnings power.

Opportunities

Genuine Parts continues to expand into new markets. A high average vehicle age, increased driving per car, and other economic trends favor GPC.

Threats

Competition (including independent stores) is always a factor that compels a successful company such as GPC to stay on top of margins, inventory, service, etc. GPC must continue improving and staying a step ahead of the competition.

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Disclaimer:
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.

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