This underrated auto stock is extremely durable

With the current market volatility, investors looking for companies with a proven track record of resilience may find that O’Reilly Automotive (ORLY 0.29%) corresponds to the invoice. In this clip from “The Rank” on Motley Fool live, recorded on June 13Motley Fool contributor Tyler Crowe explains how O’Reilly Automotive has remained a sustainable business and continued to show resilience over the years.

Tyler Crowe: O’Reilly also has a small DIY business, so it’s a bit more repair-focused. You can actually walk in and have your car repaired rather than just selling and distributing parts. If we’re going to talk about free cash flow it doesn’t pay a dividend but instead it’s one of those companies that says I’m going to buy back all the shares as much as I can and then we check it out just because I I have it right in front of me. Over the past 10 years, O’Reilly Automotive has reduced its outstanding shares by 47%. Every stock is about half of it compared to where we were 10 years ago. It gives you an idea of ​​what they did with that free cash flow, because it’s not capital. It’s not great capital. He intends to grow the business like it needs a lot of working capital because of your inventory of parts and things like that, but you’re not buying data centers for the net or anything or don’t do a lot of building from scratch. You rent in a mall and store auto parts. You don’t do a long development pipeline or anything like that. Here’s one of the things that I found very attractive, although it’s not the cheapest stock in the world right now, I think we’ll be kicking off trading in a second, but here’s the thing that I liked the most is which, at its current price, trades for a free cash flow yield, which is its annual free cash flow dividend by its market capitalization. It has a free cash flow yield of 6.4%. Just to make some comparisons, PayPal (PYPL 2.35%)even after its 75% drop, shows a free cash flow yield of 5.7%, A. O. Smith (AOS -0.90%) 5.5%. Just going back to its more traditional valuations, O’Reilly has a P ratio of 19, so not super expensive. I guess we’ll call it relatively cheap compared to the market. But overall I think there’s a lot of value in what they’re doing and it’s a very sustainable business.

Sallie R. Loera