Genuine Parts Company: Buy, Sell, or Hold?

The business Genuine Parts (NYSE: GPC) operates in 4 key business lines: Automotive Parts (NAPA Auto Parts) Industrial Parts (Motion Industries) Office Products (S.P. Richards) Electrical/Electronic Materials (EIS) Source: www.genpt.com

Its genuinely a parts company Source: Company 10-K for FY 2013, via edgar.sec.gov. Auto parts represent just over half the companys revenues. Industrial parts generate about a third of its sales. Parts are less economically sensitive than total autos. Average age of a car on the road: 11.4 years Older cars typically need more parts/maintenance than new ones.

Compared to other auto parts companies, Genuine Parts shines on several key financial metrics: The highest total revenue The strongest dividend yield The only one with any sort of dividend growth trend The least debt-levered balance sheet Why consider Genuine Parts over its peers?

But is it worth owning? Genuine Parts operates in a fairly stable industry. It looks reasonable on key measures compared to its peers. Still, for an outside investor, its only worth owning if it looks capable of potentially providing decent risk-adjusted returns. You will never know for certain, but looking at the companys: Balance sheet Dividend practice, payout ratio, and coverage levels Valuation ...will usually help you get a sense for the companys potential.

Key Financial Factor Review -- Balance Sheet Genuine Parts balance sheet looks reasonable -- and solid enough to help it navigate economic fluctuations. Debt/equity ratio around 0.2 $150 million in cash on its balance sheet 1.6 current ratio Genuine Parts could be here, based on its balance sheet.

Key Financial Factor Review -- Dividend Genuine Parts has a strong and well-supported dividend Payout ratio of 49% Current yield of 2.3% 58 years of dividend growth, with a 7% increase in 2014 Reasonable current yield, a solid payout ratio with room to keep growing as the company does, and a long history of directly rewarding shareholders for the risks they take. Genuine Parts could be here, based on its dividend.

Key Financial Factor Review -- Valuation Market cap of $13.1 billion on July 26, 2014 Fair-value estimate around $11.6 billion Sales growth slowed in the most recent quarter. All fair-value estimates rely on assumptions for the future and may not reflect what the company will actually deliver. Genuine Parts market cap is close enough to that fair-value estimate that theres no compelling need to sell based on valuation. Genuine Parts could be here, based on valuation.

Net conclusion: Hold and monitor Genuine Parts composite result Genuine Parts continues to operate effectively, grow reasonably and reward its shareholders decently. It hasnt overleveraged its balance sheet or committed to unsustainable dividends. Its valuation looks reasonable enough to continue holding, but not cheap enough to make it a compelling buy.

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