Can O'Reilly Automotive Stock Beat the Market?

O’Reilly Automotive (ORLY 0.18%) might not get the attention it deserves from the investment community. That’s because it’s in the business of selling aftermarket auto parts, which isn’t the most exhilarating activity.

The performance is far from sleepy, however. This retail stock crushed the S&P 500 index in the trailing-five-year period, putting up a 215% return (as of Feb. 27). And it’s not even a close race.

Can O’Reilly beat the market in the future?

Image source: Getty Images.

Earnings growth is set to continue

In the past 10 years, O’Reilly’s diluted earnings per share (EPS), adjusted for the 15-for-1 stock split in June 2025, increased at a compound annual rate of 17.1%. On its own, this is a wonderful trend that showcases durable fundamental strength. What’s more impressive, though, is that there was never a year that saw this profit figure decline.

Between 2025 and 2028, consensus analyst estimates call for EPS to increase at a yearly clip of 9.8%.

Durable demand powers share repurchases

The company’s 6,585 stores (of which 6,447 are in the U.S.) don’t see demand that fluctuates that much. This is not a cyclical business. In fact, O’Reilly is recession-proof.

Think about what it actually sells. Brakes, motor oil, cleaning products, wiper blades, and batteries help keep people’s vehicles running smoothly. This isn’t a nice-to-have; it’s a mission-critical necessity that’s an urgent matter. Whether we’re in a recessionary scenario or a period of extremely low unemployment and rising wages, this dynamic does not change.

Over the long run, O’Reilly benefits from the aging vehicle fleet. And the fact that Americans as a whole drive more miles each year also increases wear and tear on cars.

This backdrop leads to sizable and sustainable profits and free cash flow, supporting management’s notable capital allocation policy. Over the past two years, O’Reilly’s diluted outstanding share count was reduced by 6.5% thanks to stock buybacks. This increases the earnings per share for existing investors.

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NASDAQ: ORLY

O’Reilly Automotive

Today’s Change

(-0.18%) $-0.17

Current Price

$94.10

Key Data Points

Market Cap

$79B

Day’s Range

$93.06 - $94.82

52wk Range

$85.55 - $108.72

Volume

1.6M

Avg Vol

6.2M

Gross Margin

51.59%

How should investors think about the valuation?

The market hates uncertainty. On the other hand, it appreciates certainty. This is what O’Reilly has given the investment community.

As a result, the stock never appears to trade at a cheap valuation. Right now, the price-to-earnings (P/E) ratio is 31.7. Exactly one decade ago, the P/E multiple was 28.6, not a bargain opportunity by any stretch of the imagination. However, during that 10-year time frame, the stock price ripped 436% higher.

While I’ve always been hesitant to buy shares due to the high valuation, there’s a valid argument to be made that O’Reilly will always trade at a premium. If this is your belief, then strong EPS gains over the long term should help the stock keep up its streak of beating the market.