GPC Stock Analysis - Top Dividend Aristocrat Stocks Series | Summary and Q&A

TL;DR

Genuine Parts Company (GPC) is analyzed for its dividend potential and stock valuation using the dividend discount model and discounted free cash flow valuation.

Key Insights

• 💗 GPC operates in multiple sectors and has been growing steadily in terms of revenue, gross profit, and net income.
• 🪐 Net income margins have remained relatively consistent between four and five percent since 2011.
• ⚡ The average age of light passenger vehicles in the United States has been increasing, indicating a sustained business model for GPC.
• 🫥 GPC's dividend per share has been growing steadily, in line with the requirements of the dividend aristocrats ETF.
• 🈹 The dividend discount model and discounted cash flow valuation suggest that GPC stock is fairly valued or slightly overvalued at its current price.
• 👋 GPC may be a good investment during market pullbacks due to its historical performance during recessions.
• 😥 Adding a margin of safety is recommended when determining the entry point for purchasing GPC stock.

Transcript

hi I'm Jimmy in this video we're looking at the genuine parts company ticker symbol GPC this video is part of our new dividend aristocrat series where we're analyzing each of the companies within the dividend aristocrats ETF the goal with this series is to see if we can find great dividend paying stocks that have a good chance of paying reliable di... Read More

Questions & Answers

Q: What are GPC's main business segments?

GPC operates in the automotive, industrial replacement parts, office products, and electronic materials sectors, with the majority of revenue coming from the automotive segment.

Q: Why is GPC's net income relatively small compared to gross profit and total revenue?

Retail businesses like GPC often have small net income margins due to lower pricing to attract more customers. This is why their net income is small compared to gross profit and total revenue.

Q: What is the growth outlook for GPC's dividends?

Analysts expect GPC's dividend per share to continue growing, as indicated by the green bars in the chart showing dividend per share since 2002.

Q: How is GPC's stock valued using the dividend discount model and discounted cash flow valuation?

Based on a dividend yield of almost three percent, an estimated dividend growth rate of five percent, and other factors, the fair value of GPC stock is estimated to be around $107 per share. Using the discounted cash flow valuation method, the fair value is estimated to be around $99 per share.

Summary & Key Takeaways

• GPC sells automotive, industrial replacement parts, office products, and electronic materials primarily in the United States, Canada, and Mexico.

• Revenue, gross profit, and net income have consistently grown since 2009, although net income margins have remained between four and five percent.

• The average age of light passenger vehicles in the United States has been increasing, indicating a sustained business model for GPC, which aims to maintain its dividend growth.