Insider Trading Report: Advance Auto Parts (AAP)

Four directors at Advance Auto Parts (AAP) recently bought shares. Director Eugene Lee led the group with a 7,635 share buy. That increased his holdings by 41 percent, and came to a total stake of $500,160. The smallest buy was for 500 shares valued at just under $33,000.

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  • This marks the first insider activity since 2021. That’s when a company EVP sold 3,500 shares when the stock traded more than three times higher than where it stands today.

    Overall, insiders at the auto parts store chain own just under 1 percent of shares.

    Advance Auto Parts has slid 63 percent in the past year, as earnings have dropped by 70 percent. While revenues increased just over 1 percent, there’s been slower sales overall as the used car market has stabilized following a shortage during the pandemic.

    The drop in shares has taken the company’s valuation to about 8 times forward earnings, down from 21 times just over a year ago. And AAP now trades at a price-to-sales ratio of 0.34, on the low end for a retail business.

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  • Action to take: The sector is out of favor right now, which is creating a value opportunity here. The company recently reduced its dividend. But at current prices, shares yield 1.5 percent.

    For traders, shares have started to move higher after gapping lower following the dividend cut. Chances are shares will keep moving higher to close the gap in the coming months. The September $85 calls, last going for about $1.50, could see mid-double-digit profits.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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