O’Reilly Automotive (ORLY 1.07%) operates brick-and-mortar locations that sell various products to DIY and professional customers. This includes things like brakes, batteries, and motor oil. It’s not an exciting business, but investors should have zero complaints.

In the past five years, this retail stock is up 242% (as of Sept. 23), crushing the broader market. But is O’Reilly a smart buy right now?

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Consider the valuation

This company has clearly made for a terrific investment. But investors should think twice before buying shares. That’s because the valuation looks rich.

The stock trades at a price-to-earnings ratio of 36.9. This is close to the most expensive that shares have sold for in the past two decades. And the ratio has climbed 65% during the past five years, which means it has contributed to investor returns.

Paying too high of a starting valuation for a company can lead to subpar performance going forward.

O’Reilly is a great business

The stock’s expensive valuation indicates investors’ appreciation for this business. And that perspective is totally justified.

O’Reilly has an impressive history of growing its revenue and earnings. And this year is on track to be the company’s 33rd straight year of reporting a same-store sales gain. O’Reilly also registers durable demand regardless of economic conditions.

Because of the valuation, investors shouldn’t buy shares today. However, it’s best to continue keeping a close eye on this business, waiting for a pullback before making a move.