The Dip Is Here for O'Reilly Automotive. Here's Whether to Buy It or Walk Away.
Key Points
Despite what the share price might suggest, O’Reilly continues to operate at a high level, with same-store sales up 8.1% in Q1.
One of the most powerful tailwinds driving the company’s demand is the rising average age of vehicles on the road.
With the retail stock trading 16% below its record, the valuation has declined to a more reasonable level.
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O'Reilly Automotive (NASDAQ: ORLY) doesn't usually go on losing streaks. Shares of the aftermarket auto parts retailer are currently trading 16% below their record (as of June 10). That all-time high was achieved in September 2025.
This retail stock has historically been a dependable winner. It's up more than five times in the past decade. But even the most successful investments deal with periods of volatility and pessimism.
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The dip is here, and it's hard to ignore. Is it time to buy O'Reilly shares or walk away?
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Same-store sales keep rising
O'Reilly's stock performance tells a different story from the fundamentals. The company reported strong financial results during Q1 2026 (ended March 31). This was highlighted by its same-store sales (SSS) increasing 8.1% year over year, supported by better-than-expected growth for both do-it-yourself and professional customers.
This marked a notable acceleration from the same period last year. And 2026 is on track to be the 34th straight year that the business will post SSS growth.
Net income jumped 12.2% year over year in the first quarter, resulting in a margin of 13.2%. Consequently, the company is a free cash flow machine. This funds growth, but it also allows the leadership team to execute its aggressive stock buybacks. Over the past five years, the diluted outstanding share count has been reduced by 21%, a powerful trend that directly bolsters earnings per share.
The long-term thesis remains intact. O'Reilly benefits from the steadily rising average age of cars that are on the road, as they require more upkeep. Management plans to open 225 to 235 net new stores just this year to capture the durable demand.
O'Reilly deserves a premium valuation
Investors that follow this business know that O'Reilly shares never really trade for a discount. The stock's average price-to-earnings ratio of 27 over the past five years isn't cheap. And the current multiple of 29.6 is 15% above the S&P 500 index.
On the surface, this isn't a bargain opportunity. But O'Reilly has proven to investors that it can consistently grow the financial metrics that matter most over the long run. The market is placing a premium on consistency and reliability.
And the stock has performed exceptionally well. It has crushed the overall market, even though it's well off its peak right now.
If you've been waiting on the sidelines for a good opportunity to add this company to your portfolio, it might be the right time to consider taking action. That said, it's not guaranteed that O'Reilly shares will recover their losses anytime soon.
Should you buy stock 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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