A Look At Advance Auto Parts (AAP) Valuation After Northcoast Research Turnaround Upgrade

Simply Wall St.01-26

Advance Auto Parts (AAP) is back in focus after Northcoast Research shifted its view on the stock, citing early progress in CEO Shane O’Kelly’s turnaround, which is built around store closures and ...

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See our latest analysis for Advance Auto Parts. The recent Northcoast upgrade comes after a volatile stretch for the stock, with a 13.38% 1 month share price return and a 20.26% year to date share price return, but a 66.07% 3 year total shareholder return decline that still weighs on the longer term picture. This indicates that recent momentum has picked up from a low base as investors reassess turnaround prospects and risk. If this turnaround story has caught your attention, it could be a good moment to look across the sector and scan other auto parts and auto manufacturers for ideas beyond a single name. With shares around $46.77 versus an average analyst target of about $51.29, and mixed signals from recent upgrades and target cuts, the real question is whether this turnaround still offers upside or if the market already reflects future progress. AdvertisementMost Popular Narrative: 13.9% Undervalued At $46.77, the most followed narrative pegs Advance Auto Parts' fair value closer to the mid $50s, framing the current price as a discount built on a detailed turnaround plan.  The consolidation of distribution centers (DCs) from 38 to 12 by 2026 aims to enhance supply chain efficiency. This reorganization, along with new market hub stores, is projected to reduce supply chain costs and improve gross margins, impacting earnings positively.  Read the complete narrative. Want to see what sits behind that fair value gap? The narrative leans on a gradual reset of margins, modest revenue progress and a future earnings multiple that undercuts many specialty retailers. Curious how those pieces fit together into the $54.30 estimate? Result: Fair Value of $54.30 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, this hinges on execution. Weaker sales trends, along with the costs and complexities of closing hundreds of stores, could easily blunt that fair value argument. Find out about the key risks to this Advance Auto Parts narrative. Another View: Cash Flows Paint A Tougher Picture While the popular narrative points to a fair value of $54.30 and an undervalued setup, our DCF model lands in a very different place. On that cash flow view, AAP at $46.77 is trading well above an estimated future cash flow value of $6.94, which implies a wide gap in expectations. That contrast raises a practical question for you: are you more comfortable anchoring on earnings based targets and turnaround narratives, or on a cash flow model that is signaling far less room for error? Look into how the SWS DCF model arrives at its fair value. AAP Discounted Cash Flow as at Jan 2026Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Advance Auto Parts for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 871 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.  Build Your Own Advance Auto Parts Narrative If you see the story differently or just prefer to pull the numbers yourself, you can build a custom view in a few minutes: Do it your way A great starting point for your Advance Auto Parts research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision. Looking for more investment ideas? If you are serious about sharpening your watchlist, do not stop at one turnaround story. Use curated stock ideas to spot opportunities you might otherwise miss.  Tap into potential growth stories at lower share prices by checking out these 3523 penny stocks with strong financials that already meet defined financial quality filters. Position yourself early in trends shaping automation and data by scanning these 23 AI penny stocks that match your view on risk and reward. Focus your research time on value focused opportunities by reviewing these 871 undervalued stocks based on cash flows where current prices sit below estimated cash flow based worth.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: Manage All Your Stock Portfolios in One PlaceWe've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocksTry a Demo Portfolio for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. 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