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

Key Points

• One of the best traits of O'Reilly's business is that it faces durable demand from customers, regardless of macro conditions.

• The company generates sizable profits, which management uses to aggressively repurchase shares.

• Despite a seemingly high valuation, the stock has historically been a huge winner.

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

O'Reilly Automotive (NASDAQ: ORLY) has done nothing but take care of its shareholders. Investors have absolutely nothing to complain about with this retail stock, which has soared 502% in the past decade and 57,620% since the initial public offering in 1993 (as of July 9). Those shareholders who got in early and held on have been rewarded.

But if you buy O'Reilly stock today, will 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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This auto parts retailer has been a huge winner

There's a reason why O'Reilly's stock performance has been so magnificent. It's because this is a high-quality business. No one will deny that statement.

For starters, O'Reilly benefits from durable demand trends. A lot of industries see their sales and profits move up and down with the flow of the economy. This isn't the case here. People need their cars to work, regardless of whether we're in a recession or a robust economy. That means that O'Reilly sees consistent spending on the part of customers.

It also helps the company that there is an aging vehicle fleet. Data from S&P Global shows that the average age of vehicles was 12.8 years in the U.S. in 2025. That's up from 11.5 years a decade ago. Cars are being used and lasting longer, which naturally increases the wear and tear that's place on them outside of the original manufacturer's warranty. This is what supports demand for the aftermarket auto parts that O'Reilly's 6,416 stores provide.

In 2024, the business posted 5.7% year-over-year revenue growth. Consensus analyst estimates call for the top line to jump by 5.4% this year. And the gains should continue. The industry is highly fragmented, giving O'Reilly an advantage in terms of brand visibility, physical reach with its store footprint, and inventory availability compared to smaller rivals.

O'Reilly's operating margin has averaged a stellar 19.9% in the past decade. And the management team has been a wonderful steward of any excess cash produced. After plowing capital back into the business to open new stores or bolster distribution capabilities, management directs money to stock buybacks. Just in the last 12 months, O'Reilly's outstanding share count was reduced by 3%. This continues a long-running trend of a shrinking share count, which boosts earnings per share.

Keep a level head when looking at the future

Every investor wants to find a prized stock. The dollar figure is different for everyone, but in my view, setting someone up for life certainly means achieving a monster return over decades. Who wouldn't want this kind of outcome?

However, investors shouldn't bank on any individual business having such a monumental impact. Building a diversified portfolio of at least 25 stocks is the best thing to do. Some companies will turn out to be massive winners, which is what O'Reilly has been, while others will be flops. That's just how the economy and stock market work.

O'Reilly undoubtedly has favorable investment qualities, as mentioned above. But the valuation is steep, which is something I've been concerned about for a while. As of July 9, shares trade at a price-to-earnings ratio of 34. Besides earlier this year, the stock hasn't been this expensive since 2000. The market remains bullish about this business.

Despite my valuation worries, shares have continued to march higher. While I think there's no margin of safety for prospective buyers today, I still wouldn't be surprised if the stock can somehow keep beating the market over the next five or 10 years. Investors have to think for themselves how highly they rank valuation in the decision-making process.

But given its scale these days, and the mature nature of the industry, O'Reilly stock isn't going to set anyone up for life. That's just not a realistic perspective to have.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.