Key Points
O’Reilly Automotive hit a new all-time high earlier this month, and it could hit more new highs before the year is over.
With modest growth, strong profit margins, and a consistent stock buyback program, it’s paid to be a shareholder of this company.
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Just three weeks ago, on Aug. 6, shares of O’Reilly Automotive (NASDAQ: ORLY) closed at their highest price ever at $104.44 each. Since the stock is within 2% of its all-time high as I write, it’s possible that O’Reilly Automotive stock will have already hit a new all-time high by the time you read this.
O’Reilly Automotive stock isn’t only reaching all-time highs — it’s also cruising past the returns for the S&P 500. Over the last five years, the S&P 500 has increased by 88%, which isn’t bad at all. But investors made much more money by investing in O’Reilly, since its shares have climbed by 230% over this time.
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Experienced investors know that high-growth businesses usually outperform the market as O’Reilly Automotive stock has. But in this case, the company has only averaged about 9% annual top-line growth over the last five years. That’s positive, but it’s also somewhat modest for a stock that has performed so well.
The difference-maker for O’Reilly Automotive’s shareholders is its stock buyback program. At the start of 2020, the company had about 76 million shares outstanding. But at the end of 2024, it had only 58 million — a reduction of 24%.
By dropping its share count at a steady rate, O’Reilly’s earnings per share (EPS) have increased enough to carry the stock to a strong market-beating performance.
What’s next?
O’Reilly Automotive operates a retail chain of nearly 6,500 locations selling automotive repair and maintenance products. And there’s really not much reason to believe that the stock won’t continue to perform well for shareholders. Even in a somewhat slower sales environment, management expects to report a full-year increase for same-store sales in 2025.
O’Reilly Automotive also continues to expect strong profit margins, and management will continue to buy back stock. This has been a winning combination in the past and will likely keep driving positive returns for investors from here.
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Jon Quast 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.
