A Springfield investor seeking top performing stocks in Missouri doesn’t have to look far, according to recent rankings by SmartAsset.
The financial technology company placed Springfield-based O’Reilly Automotive Inc. (Nasdaq: ORLY) No. 1 and Monett-based Jack Henry & Associates Inc. (Nasdaq: JKHY) No. 2 among publicly traded companies in the Show-Me State between January 2010 and March 2015.
“Overall, the companies in Missouri did very well,” said A.J. Smith, managing editor of SmartAsset, which ranked companies based on average annual returns and volatility, or risk, of the investment.
Rankings were assigned on a curve based off the best performing company, Sunnyvale, Calif.-based Pharmacyclics Inc.
Smith said the 47 Missouri companies in the study averaged annual returns of 13.5 percent and volatility at near 33 percent, compared to the national averages of 11.5 percent and 37 percent, respectively.
Andrea Batey, an executive vice president with Walnut Capital Management, said ORLY and JKHY stocks are attractive to investors because they continue to beat quarterly earnings.
“O’Reilly has done some astronomical things in terms of growth,” Batey said. “If you looked at the stock price five years ago, you’d never believe it was up this much.”
ORLY, ranked at No. 11 nationally by SmartAsset, has grown its stock price nearly 441 percent from $41.71 on March 31, 2010, to $225.98 as of June 30. The auto parts retailer hit a 52-week and historical high of $233.84 a share June 26.
For JKHY, share prices increased 168 percent from $24.06 to $64.70 through June 30. The company ranked No. 94 nationally out of the 2,500 companies in SmartAsset’s study, which included companies with a market value of more than $50 million at the end of the first quarter and are traded on a U.S. exchange.
But despite recent speculation, don’t expect a stock split anytime soon. Mark Merz, director of external reporting and investor relations for O’Reilly, said although O’Reilly’s stock split three times in its history, most recently in June 2005, another split is unlikely due to the availability of online trading and the ability to purchase partial shares.
“AutoZone, their closest competitor, they’re at $673 a share, so I kind of look at that as if AutoZone hasn’t split yet, O’Reilly probably has no intention of splitting,” Batey said, adding while there are no guarantees, the size of both O’Reilly and Jack Henry makes a split less likely to occur.
Batey said a company decides to split stock if it believes it needs to lower the share price in order to make the stock available to more people. There is no formula to follow as each company differs.
“It probably was of more interest when we had a lot more individual shareholders,” said Jack Henry & Associates CEO Jack Prim.
“At this point we’ve got what looks like about 81 million shares that are outstanding, so there is not a particular benefit for splitting the stock.”
Investment potential
Merz said overall company growth has been a key factor not only toward growing net income – which hit $213 million to end the first quarter, up 22 percent – but also is key in attracting investors.
“One of the things potential investors of any business look for is that business’ ability to grow,” Merz said.
“Historically, that’s been the best way to grow our company, by reinvesting in our business.”
Merz said O’Reilly’s guidance for 2015 calls for between $400 million and $430 million in capital expenditures on its distribution structure, maintenance of existing locations and investment in new stores. He said the company plans to open 205 new stores by the end of 2015, increasing from 200 openings in 2014 and 190 in 2013.
“Part of investing in our business is entering markets that we’re not in yet,” he said, adding O’Reilly has 4,433 stores in 43 states.
“We’re only about halfway down into Florida, so we have lots of what we call greenfield growth opportunities well into the future.”
Prim believes shareholders, about 90 percent of which are institutions such as The Vanguard Group Inc., like Jack Henry’s conservative management strategy and balance sheet.
“If you’re looking for excitement in your investment portfolio, we’re probably not the stock you want to put in there,” Prim said, citing consistent organic revenue growth between 6 and 8 percent year over year.
“It’s not bad to be boring when you have solid execution and performance.”
He pointed to the company’s base of operations in Springfield and Monett – where 1,900 of the company’s approximately 5,800 employees reside and the cost of living and facilities are low – as an influence on maintaining cost effectiveness. He added 80 percent of the company’s revenues are recurring year to year.
“Twenty percent of $1.3 billion in revenue isn’t easy to find, but when you know where the other 80 percent is coming from before you open the doors, it certainly makes it easier to focus on long-term decisions about the business,” Prim said.
Return value
Ideally, the end result for a stockholder is getting something out of the investment.
Prim said starting in 1991, Jack Henry paid an increasing dividend on its stocks every year for the last 25, and raised the amount more than 80 percent in May 2013. As of March this year, the company’s results from its fiscal third quarter showed $56.2 million in dividends paid, up from $52.8 million the year before.
“Once you start, you want to be fairly confident that you can continue to do it for the long term,” Prim said. “If you suddenly decide to stop, that can cause concern for people who have been used to receiving it.”
Both O’Reilly and Jack Henry take part in a share repurchase program, buying shares and retiring them, increasing the value of shares on the market and the shareholder’s percentage of company ownership. Prim said Jack Henry repurchased about 2 million shares in the last year, worth at least $125 million. Since board implementation in January 2011 through March 2015, O’Reilly repurchased an aggregate of $4.43 billion worth of shares.
Both stocks have set multiple record highs in recent months. Analysts predict ORLY stock to remain strong, setting the short-term target price – aka the price that, if achieved, would result in a trader recognizing the best possible outcome for their investment – at an estimated $237.91. The auto parts company is set to release its second-quarter earnings report July 29.
With a short-term target price of $71, JKHY ended its fiscal year June 30, with an earning report expected in August.
As of July 7, ORLY shares were trading at $232.41, compared to a 52-week range of $145.51 to $234.20. JKHY was trading at $65.53, compared to a 52-week range of $51.86 to $70.25.
