The following company analysis is about Genuine parts, one of the few dividend stocks out there, which have increased their dividends for 60 years. Genuine parts is typical cyclical investment, which currently trades at decent discount from its 5 year high. But let’s have a look if it worth an investment.
Genuine Parts Company (GPC) is chiefly a distributor of automotive replacement parts in the U.S., Canada, and Mexico. The company operates in four segments: Automotive Parts Group, Industrial Parts Group, Office Products Group, and Electrical/Electronic Materials Group. GPC was was founded in 1928 and is headquartered in Atlanta, Georgia.
Currently GPC is priced at 89.40 USD per share, which is 16.7% below its 5 year high of 107.20 USD in December 2014. The decline in the share price is a well let’s typical for such a cyclical investment, in the last 3 years ups and downs were typical for that stocks. The stock price is also very strong related to development of the car sector.
As you can see the current ratios are besides of the Price/Sales ratio all below the 5 year average. Using my current method to calculate a fair share price based on the 5 year average numbers, I would get a price of 87.20 USD so from that perspective the current level of the share is fair. If I use the Market Fair Value Ratio according to morningstar I would get a price of 96.1 USD.
The outlook for GPCis expecting a 5-Year growth of 12.5% which results in a forward P/E ratio of 17.0. In my further analysis I also included a simple calculation with the following Graham Formula:
The result was a price of 152.43 USD.
So all in all according to the valuation GPC is not cheap but is not expensive either, I would say it is at a price where you can have an eye on the stock.
GPC has an impressive dividend history, the company has increased its dividend for now 60 years in a row. The average growth in the last 6 years was at 7%. Looking at the current pay ratio of 59.3% leaves as well room for future growth. In the table below you can see my dividend growth expectations for the next years.
So let’s finally have a look at the most important part the financial situation of GPC. Looking at the balance sheet of GPC shows us the company is financially healthy, especially the fact that there is almost not long term debt is very impressive. Just that the equity ratio is declining since a couple of years is a little disappointing.
- Equity Ratio: 35.58%
- Debt to Equity: 0.16
- Current Ratio: 1.32
I think through the latest up and downs GPC is a stock to watch at but at the same there are cheaper stocks out there at the moment. There is no question that GPC has an impressive dividend history and that financial situation and the outlook look quite well but the dependency on automobile industry is just too high for me, so that I would buy it at the current price.
What do you think about GPC? Would you buy it at its current price or do you even have it already in your portfolio?
Disclosure: Long GPC
I do not recommend any decision to the reader or any user, please consult your own research. Thank you for your understanding!