Could Buying O'Reilly Automotive Stock Today Help Set You Up for Life?

Key Points

• O’Reilly doesn’t post huge growth numbers, but its gains are durable and should continue.

• The company is extremely profitable, which helps management buy back lots of shares.

• The stock's current high valuation could pose a challenge for future investor returns.

• 10 stocks we like better than O'Reilly Automotive ›

We all want to find companies that can generate life-changing wealth. Imagine buying Apple, Microsoft, or Monster Beverage 20 years ago. These businesses have put up fantastic returns.

O'Reilly Automotive (NASDAQ: ORLY) is another company that deserves some attention. Its shares have soared 5,390% in the past two decades and currently trade in record territory. But if you bought this retail stock today, could it set you up for life?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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O'Reilly's steady growth is a key feature

When it comes to revenue gains, O'Reilly isn't going to turn heads. The business doesn't operate in exciting markets, like artificial intelligence or cloud computing. However, it makes up for it by putting up durable growth.

This year is set to be the company's 33rd straight of posting same-store sales growth. Any way you look at this, it's a phenomenal track record that is the envy of the retail sector. This trend points to consistently rising demand for aftermarket auto parts and supplies -- like brakes, batteries, and motor oil -- that O'Reilly sells in its thousands of stores nationwide.

There are two primary tailwinds that have propelled the company in the past, and they should continue doing so. For starters, the average age of passenger cars on the road in this country keeps increasing. A longer useful life means these vehicles deal with more wear and tear, requiring investments in maintenance and repairs.

What's more, the number of cars on the road is rising. According to the Auto Care Association, there was a 14.2% increase in the number of registered vehicles in the U.S. from 2013 to 2023. This expands O'Reilly's total customer pool.

Between 2014 and 2024, the company's revenue increased at a compound annual rate of 8.8%, and there was not a single down year. Even in 2020, when the pandemic ravaged the economy, it reported a 14.3% revenue gain.

In both robust and recessionary economies, consumers will spend money at O'Reilly. Having functioning cars is a mission-critical requirement for people, regardless of the broader macro picture.

The potential for monster returns (or the absence of it)

When buying stocks that can help set investors up for life, monster growth is typically a necessity. As mentioned, O'Reilly doesn't fall into this category, although its sales gains have proved to be sustainable. And given the highly fragmented nature of the industry, there are certainly many years of expansion ahead.

This at least makes O'Reilly worthy of being on your watch list. That perspective is supported by the company's incredible profitability. The operating margin was a reported 20.2% in the second quarter (ended June 30). This leads to powerful free cash flow generation.

After investing in growth initiatives, management plows cash into stock buybacks. The constant reduction in the outstanding share count has benefited investors, since it promotes growth in earnings per share.

But investors shouldn't expect the stock to be a home run from this point forward. The share price will probably keep rising in the years ahead, but I'm not sure it will keep beating the market. That's because its price-to-earnings ratio of 37.3 is very expensive on a historical basis. This creates a major hurdle to achieving strong returns.

And for what it's worth, investors should avoid thinking that an individual stock can produce results that can set them up for life. While we all want to be smart enough (and lucky enough) to find the great winning investments, it's very difficult to do.

The best approach is to work toward building a diversified portfolio of high-quality businesses. This strategy has a high chance of long-term success.

Should you invest $1,000 in O'Reilly Automotive right now?

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Monster Beverage. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.