Today we're going to take a look at the well-established Genuine Parts Company (NYSE:GPC). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$147 and falling to the lows of US$113. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Genuine Parts' current trading price of US$114 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Genuine Parts's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What's The Opportunity In Genuine Parts?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 14.6x is currently trading slightly below its industry peers' ratio of 14.6x, which means if you buy Genuine Parts today, you'd be paying a decent price for it. And if you believe Genuine Parts should be trading in this range, then there isn't much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Genuine Parts's share price is quite stable, which means there may be less chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Genuine Parts?

Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Genuine Parts' earnings over the next few years are expected to increase by 22%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in GPC's positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at GPC? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you've been keeping an eye on GPC, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for GPC, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Genuine Parts at this point in time. In terms of investment risks, we've identified 1 warning sign with Genuine Parts, and understanding it should be part of your investment process.

If you are no longer interested in Genuine Parts, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data 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 financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.