Benzinga | Nov 11, 2021 10:08AM EST

Price Over Earnings Overview: Advance Auto Parts



In the current session, Advance Auto Parts Inc. (NYSE:AAP) is trading at $236.45, after a 0.72% gain. Over the past month, the stock increased by 10.05%, and in the past year, by 53.54%. With performance like this, long-term shareholders are optimistic but others are more likely to look into the price-to-earnings ratio to see if the stock might be overvalued.

Assuming that all other factors are held constant, this could present itself as an opportunity for shareholders trying to capitalize on the higher share price. The stock is currently higher from its 52 week high by 0.17%.

The P/E ratio is used by long-term shareholders to assess the company's market performance against aggregate market data, historical earnings, and the industry at large. A lower P/E can either represent a company's poor future earnings potential or a buying opportunity relative to other stocks. It shows that shareholders are less than willing to pay a high share price, because they do not expect the company to exhibit growth, in terms of future earnings.

Depending on the particular phase of a business cycle, some industries will perform better than others.

Advance Auto Parts Inc. has a better P/E ratio of 25.19 than the aggregate P/E ratio of 13.51 of the Specialty Retail industry. Ideally, one might believe that Advance Auto Parts Inc. might perform better in the future than it's industry group, but it's probable that the stock is overvalued.

There are many limitations to price to earnings ratio. It is sometimes difficult to determine the nature of the earnings makeup of a company. Shareholders might not get what they're looking for, from trailing earnings.