top of page

Hype Asset of the Day | May 25, 2022

Genuine Parts Company (NYSE:GPC)

Headquartered in Atlanta, Genuine Parts Company (NYSE: GPC) is a leading distributor of replacement automotive parts. NAPA Auto Parts is perhaps its best-known subsidiary. The company has been steadily chugging along for almost 100 years and has been routinely upping its payouts for over half that time, making it a favorite stock among dividend investors. Genuine Parts has proven itself numerous times during periods of economic uncertainty, likely the reason for its sharp 125% increase in mentions over the past day. The current share price of the auto parts company is hovering around $128, down 6.15% YTD.

Is Genuine Parts Company a Good Investment - Positives

Wondering if you should add Genuine Parts to your portfolio? You’re not alone! To help you decide whether it's the right investment for you, we’ve broken down a few of the main arguments for buying Genuine Parts stock.

  • As we briefly touched on, Genuine Parts has proven that it can still perform well during recessions, war and everything in between. Because people have less money, they’re more likely to hold onto and repair their vehicles rather than buy a new one, feeding into Genuine Parts’ business model.

  • Genuine Parts Company is setting records, even during times of poor economic health. It reported Q1 sales of $5.3 billion, a widely impressive 19% year-on-year increase. Adjusted profits are looking equally as healthy, increasing by an impressive 24%.

  • One of the primary reasons people invest in Genuine Parts Company is its dividends. Since it went public in 1948 it has rewarded investors with a cash dividend every year. Furthermore, the company has increased its payout for 66 consecutive years all the way to today’s figure of $0.895 per share.

  • Analysts have been lowering expectations almost universally as the world’s financial markets are in turmoil. However, Genuine Parts is one of the few companies that is still beating estimates. In fact, over the past 10 quarters, Genuine Parts has beaten revenue estimates 7 times, incredibly impressive if you ask us.

  • When you consider how much Genuine Parts brings to the table, its valuation is still fairly low. The stock is trading at a price-to-earnings ratio of 17.3, a hair above the S&P at 17.1. However, considering Genuine Parts’ history of stability and dividend increases, you would expect to be at a slight premium compared to the S&P. Because of this, in terms of value, few stocks are better than Genuine Parts right now,

Is Genuine Parts Company a Good Investment - Negatives

No business is perfect and Genuine Parts is no different. Here are a couple of reasons why Genuine Parts might not be as great as it first seems.

  • Much of Genuine Parts' renown comes from its history of paying and increasing dividends. Because of this, if something were to affect its ability to do so, it would be catastrophic for the company. While this admittedly seems improbable, the current mass of economic headwinds could be the perfect storm to dethrone the ‘dividend king’.

  • Diversification is often key to the longevity of any business. Unfortunately for Genuine Parts, around 75% of its revenue comes from North America. Meaning, that if something affected its sales in the region, we could see a sharp drop across pretty much every financial metric, certainly not ideal for investors.

Hype Asset of the Day - Conclusion

All in all, Genuine Parts is a very resilient company that has done well to consistently perform even during times of recession. Given the current economic landscape, this seems like a very important factor. Combine this resilience with strong dividend payments and Genuine Parts becomes a clear choice for anyone looking for a relatively low-risk investment to help them weather the coming months.

HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.

5 views0 comments


bottom of page