Shares of auto parts retailer Advance Auto Parts (AAP -2.34%) declined by 23.9% in February, according to data provided by S&P Global Market Intelligence. The decline came mainly after the company issued disappointing fourth-quarter 2024 earnings and 2025 guidance.

Advance Auto Parts reverses again

This stock has been a value proposition for over a decade, and the fundamental value case remains the same. All the company needs to do is improve its operational metrics to be comparable to its peers, such as O'Reilly Automotive or AutoZone, and the stock should  appreciate handsomely. Case closed.

But it's a case that's turned out to be more of a Pandora's box for investors, management teams, numerous directors on the board, activist hedge funds like Starboard Value and, more lately, Third Point and Saddle Point.

None of them seem to have fundamentally improved matters, and the latest results saw management reiterating strategic priorities that have been made, in one form or other, by Advance Auto Parts management for a decade -- the need to source products strategically, enhance parts availability, consolidate distribution centers, and "bring parts to market faster."

These priorities speak to the necessities of auto parts retailing: getting necessary parts into the stores so owners/professionals can reliably pick them up when they need to service their cars quickly. Unfortunately, Advance Auto continues to lag behind its peers in doing this, which is why its margins and free cash flow generated from assets continue to lag.

AAP Operating Margin (TTM) data by YCharts

Speaking of cash flow, Advance Auto also continues to lag its peers in terms of receivables turnover (net credit sales/accounts receivable) --a metric that measures a company's efficiency at collecting cash from customers.

AAP Receivables Turnover (TTM) data by YCharts

The 2025 outlook

As such, when investors see a fourth-quarter operating loss of $99.4 million, same-store sales declining 1% year over year, and full-year 2025 guidance that calls for same-store sales growth of just 0.5%-1.5%, adjustable operating income margin from continuing operations of 2%-3%, and a cash outflow of $25 million to $85 million, it's understandable that they sold the stock off.

Advance Auto Parts may well be a value opportunity in waiting. Still, investors will want to see clear evidence of improvement in some of the metrics discussed above before buying in.