Q4/FY 2025 - O'Reilly Automotive
Fwd comp growth excl. tariff benefit below O'Reilly standards - declining ROI on incremental investments
Yesterday, after the bell, O’Reilly Automotive reported its full-year results. At the time of writing this recap, the stock’s down 4%.
Frankly, today’s conclusions are more or less the same as what we’ve described in October 2025 (and in prior recaps as well).
That’s actually a very good sign because it effectively highlights that O’Reilly isn’t a business with economics that will completely alter over the course one quarter (not even a year, or even three to five years). What’s changed, though, is that the increased consolidation of market share has left the industry with stronger players. The cost of acquiring the same relative market share has thus increased, and ironically, valuation had increased to all-time highs in September 2025 (when we sold our final allocation in AutoZone).
When we sift through the comments from the management and the FY26 outlook (keeping in mind the embedded conservatism that’s historically been applied by the management), it feels that this cost will continue to increase going forward.
While steady businesses are great to own, it doesn’t mean the valuation/investor expectations are constant - there’s always volatility, created by several factors that aren’t so easy to understand (e.g., momentum flows). Rather than getting caught up in a discussion on valuation relative to the recent past - it’s better to stay rational on the core drivers of value over time. Today, O’Reilly’s valuation remains unjustifiably high (and we’ve been covering the name for a long time to spot the better buying opportunities).
Let’s take a closer look at the report, some interesting remarks, and how it all affects the valuation model.