O'Reilly Automotive, Inc.ORLYNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics Financials Growth Insiders

DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $88.08 per share(market-calibrated)

-6.7%

Upside to Fair Value

Current

$94.41

Pure Model

$87.32

Fair Value

$88.08

Bull Case

$113.21

Bear Case

$67.01

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

3.51%

Calibrated Growth

3.08%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $87.32.

What's Driving This Ratingfor ORLY

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.73% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$202M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 20.37% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 6.51% revenue growth, fading to 3.00% by Year 10. Revenue reaches $27.7B (vs $17.8B today).

✓

Model and market roughly agree

Market-implied terminal growth of 3.51% is close to the model's 3.00% (only 51bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 61.65% indicates efficient cash generation. FCF reaches $3.9B by Year 10 (13.99% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.62

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.27%

Cost of Debt

Pre-tax Cost of Debt1.83%

Tax Rate21.66%

After-tax Cost of Debt1.43%

Equity Weight (E/V)88.42%

Debt Weight (D/V)11.58%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (88.42% × 7.27%) + (11.58% × 1.43%)

= 6.60%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$18.9B	$21.4B	$23.0B	$25.1B	$27.7B
EBIT	$3.9B	$4.4B	$4.7B	$5.1B	$5.6B
Tax	$836M	$943M	$1.0B	$1.1B	$1.2B
NOPAT	$3.0B	$3.4B	$3.7B	$4.0B	$4.4B
+ Depreciation	$441M	$497M	$535M	$583M	$645M
- Capex	$896M	$976M	$1.0B	$1.1B	$1.1B
- Δ NWC	$116M	$125M	$109M	$101M	$81M
Free Cash Flow	$2.5B	$2.8B	$3.1B	$3.4B	$3.9B
Discount Factor	0.938	0.826	0.727	0.639	0.528
Present Value	$2.3B	$2.3B	$2.2B	$2.2B	$2.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.9B

Terminal Growth Rate3.00%

WACC6.60%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$111.1B

PV of Terminal Value$58.6B

Exit Multiple Method

Year 10 EBITDA$6.3B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$125.8B

PV of Terminal Value$66.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$22.2B

PV of Terminal Value$58.6B

Enterprise Value$80.8B

(-) Net Debt$10.3B

Equity Value$70.5B

Shares Outstanding851M

Price per Share$82.75

Exit Multiple Method

PV of Projected FCFs$22.2B

PV of Terminal Value$66.4B

Enterprise Value$88.6B

(-) Net Debt$10.3B

Equity Value$78.2B

Shares Outstanding851M

Price per Share$91.88

Pure Model Fair Value

$87.32

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
4.60%	$120.93	$134.90	$133.44	$127.60	$122.04
5.60%	$95.57	$101.84	$110.51	$123.33	$122.04
6.60%	$79.56	$82.97	$87.32	$93.07	$101.04
7.60%	$68.10	$70.16	$72.68	$75.81	$79.81
8.60%	$59.26	$60.61	$62.19	$64.10	$66.41

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$67.01

-29.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.77

Base Case

$87.32

-7.5% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.62

Bull Case

$113.21

19.9% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.52

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth6.51%

Year 3 Revenue Growth6.24%

Year 5 Revenue Growth5.00%

Year 7 Revenue Growth4.20%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin20.37%

Tax Rate21.66%

Historical Capex / Rev4.73%

Terminal Capex / Rev4.00%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

Explore More

S&P 500 Screener

Filter and sort all 500 stocks

Market Movers

Today's biggest gainers and losers

Market Heatmap

Visual sector performance