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Thursday's Featured Story Advance Auto Parts is A Great Risk/Reward Play If EPS DeliversWritten by Gabriel Osorio-Mazilli. Published 9/22/2025. 
Key Points - The current setup in the automotive industry has a few similarities to that of the post-COVID-19 environment, creating a new opportunity.
- Advance Auto Parts is exposed to another cycle of outperformance in the industry, with the right fundamental setup.
- Institutions are buying ahead of the forecasted EPS expansion scenario that's coming to this stock.
EPS growth is a key driver of stock performance. One simple way to spot a potential upside is to find companies trading well below their relative highs but poised to close the gap if EPS growth meets expectations. Within the automotive sector, one stock fits this profile, offering a compelling risk-reward setup—provided it delivers on its EPS promise. What if you could eliminate all the uncertainty from your trading?
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Here's the good news: our team specializes in uncovering hidden gems before the market catches on. 👉 Download Your Free Guide Now Even if growth targets fall short, the stock's depressed valuation limits downside risk. That stock is Advance Auto Parts Inc. (NYSE: AAP), a key parts supplier for both commercial and retail customers. Supply and demand shifts in the U.S. auto industry, driven by trade tariffs, could help the company fulfill its EPS projection. Breaking Down the Advance Auto Parts Setup Despite a 28.2% year-to-date rally, AAP still trades at just 85% of its 52-week high. In 2022, the stock reached $244 per share under similar industry dynamics. Supply chain disruptions after COVID-19 lockdowns interrupted semiconductor and chip imports, essential to automotive manufacturing. With new vehicles scarce, consumers turned to the used car market. Although today's situation is less severe, tariffs have generated a comparable constraint on new-vehicle supply. Rising costs and uncertainty continue to slow new-vehicle production and imports, pushing consumers toward the used-car market. Used vehicles require more upkeep, which boosts demand for aftermarket parts from both dealers prepping cars for sale and drivers maintaining their vehicles. That's where MarketBeat's EPS consensus forecast of $1.05 by Q3 2025 comes into play. Momentum Is Here Ahead of Schedule Wall Street projects 52% EPS growth from today's $0.69, but the most recent quarter already hints at this momentum. AAP reported $0.69 EPS, well above the consensus of $0.59, suggesting these industry dynamics are unfolding faster than expected. AAP's price/earnings-to-growth (PEG) ratio stands at just 0.3x, implying about 70% of projected EPS growth isn't yet reflected in the share price. Institutional confidence adds to this bullish picture. In August 2025, State Street boosted its AAP stake by 13.5% to $111.9 million, now representing 4% of the company's shares. These professional investors clearly see an opportunity in AAP, blending momentum and fundamentals. One last factor solidifies its favorable risk-reward: with a market cap of $3.6 billion, AAP has more room to double than larger peers, and only a significant setback would knock the stock lower—limiting downside risk compared with its substantial upside potential.
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