This Phenomenal Stock Skyrocketed Over 600% in the Last 10 Years: Time to Buy?

In the last decade, the Nasdaq Composite has been very good to investors. The tech-heavy benchmark returned 310% during this time, including dividends. But there’s a retail stock in the index that has performed significantly better.

I’m talking about O’Reilly Automotive (NASDAQ: ORLY). Shares of the aftermarket auto parts seller have soared 619% since Feb. 27, 2014, turning a $10,000 initial cash outlay into a whopping $71,880 today. Is it time to buy this phenomenal stock right now?

Boring is best

High-flying tech companies that have exposure to the artificial intelligence trend are getting all the attention from investors these days. But don’t let that excitement distract you from O’Reilly and its boring business model.

With 6,095 stores across the U.S., this company sells things like brakes, motor oil, and wiper blades to DIY and professional car mechanics. It might fly under the radar, but O’Reilly has a successful history of strong fundamental performance.

Between 2018 and 2023, the company’s revenue and diluted earnings per share increased at compound annual rates of 10.6% and 19%, respectively. What’s even more impressive than these headline figures is how O’Reilly was almost untouched during the coronavirus pandemic, growing sales by 14% and net income by 26% in 2020.

The business generated a ton of free cash flow to the tune of $2 billion last year. After reinvesting in growth initiatives, like opening new stores or expanding distribution capabilities, management focuses on buying back lots of stock. In the past 10 years, the outstanding share count has been reduced by 46%.

Protecting the downside

The industry O’Reilly operates in is highly fragmented, meaning there are a lot of smaller and independent shops in competition with it. Because customers have a sense of urgency when finding the right parts to make sure their cars work properly, having adequate inventory is absolutely essential. This is where O’Reilly’s scale can help win other new customers,…