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Pep Boys Manny Moe And Jack Maybe Good For Sellout Speculation

William Bias profile picture
William Bias


  • Pep Boys Manny Moe and Jack sells automotive parts and performance car services.
  • Pep Boys Manny Moe and Jack sports lousy fundamentals.
  • Pep Boys Manny Moe and Jack’s shareholders have lost out over the long-term.

It's important for long-term investors to develop a guide for doing their investment research. Over the years I have developed questions to guide me in my thinking when researching the publicly traded universe. Today let's talk about Pep Boys Manny Moe and Jack (NYSE: NYSE:PBY-OLD).

1.) What does the company do?

When you buy shares in a company you effectively become part owner of that company. Therefore, it's important for an investor to understand what a company sells. Pep Boys Manny Moe and Jack sells auto parts, tires and services pertaining to automotive repairs. The company definitely fulfills a societal need. However, just because a company offers a good, practical product and/or service doesn't necessarily make it a good investment. Investors need to look under the hood at a company's fundamentals.

2.) What do the fundamentals look like?

Investors should look for companies that grow revenue and free cash flow over the long-term, retaining some of that cash for reinvestment back into the business and for economic hard times. Excellent revenue and free cash flow growth serve as catalysts for superior long-term gains. Over the past five years Pep Boys Manny Moe and Jack's revenue expanded a mere 8%. Its net income and free cash flow declined 163% and 245%, respectively, during that time, which is just plain horrible (see chart below).

PBY Revenue (<a href=

PBY Revenue (TTM) data by YCharts

Pep Boys Manny Moe and Jack attempted to grow its revenue by opening stores and acquiring others. While the company enjoys some success in the service part of its business, it struggles with bringing customers through the door to buy its merchandise due to competition.

In FY 2014, the company wrote down some of its goodwill due to the lousy prospects of some of its business, which hurt net income comparisons. The consistent loss on

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: I am/we are long GPC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (6)

RJM2 profile picture
What will I do with the shares I paid $8.51 and $9.33 for ?

I think it will be sold for $13-14 at a bare minimum.

Interesting how you ignored the fact that Gabelli owns a huge chunk and just got multiple board seats.
William Bias profile picture
That's interesting.

Thanks for the note.

William Bias profile picture
It finally came to fruition.

Thanks for reading.

it may be ripe for buyout, but it should probably just close its doors. no one will make its current business model profitable.
Mark Krieger profile picture
thanks for the article. It read well, and provided some great information.

The writing is on the wall for the buyout. Look for a 20% premium to emerge from the suitor.
William Bias profile picture
Hi Mark,

Looks like that happened today. Thanks for reading.

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