AutoZone Inc. (AZO) — Priced at a Fair Value With Acceptable Growth Fundamentals

During the last year, AutoZone returned a positive performance of 17.8%, with a high of $2610.05 and a low of $1703.32. Over the same period, the stock outpaced the S&P 500 index by 24.0%. The company's 50-day average price was $2463.89 per share as of April 2023. AutoZone, Inc. retails and distributes automotive replacement parts and accessories. Based in Memphis, TN, the large-cap Consumer Cyclical company has 69,440 full time employees. AutoZone has not offered a regular dividend during the last year.

Better Gross Margins Than the Industry Average of 29.9%:

2019-08-31 2020-08-31 2021-08-31 2022-08-31
Revenue $11,863,743 $12,631,967 $14,629,585 $16,252,230
Gross Margins 53.6% 53.6% 52.8% 52.1%
Operating Margins 18.7% 19.1% 20.1% 20.1%
Net Income $1,617,221 $1,732,972 $2,170,314 $2,429,604
Net Margins 13.63% 13.72% 14.84% 14.95%
Earnings Per Share $63.43 $71.93 $95.19 $122.99
Diluted Shares 25,498 24,093 22,799 18,398
Free Cash Flow $1,632,463 $2,262,372 $2,896,776 $2,538,744
Capital Expenditures -$496,050 -$457,736 -$621,767 -$672,391
Net Current Assets -$6,581,079 -$8,489,977 -$9,898,432 -$12,185,972
Current Ratio 0.91 1.08 0.87 0.77
Long Term Debt $5,206,344 $5,513,371 $5,269,820 $6,122,092
Net Debt / EBITDA 1.94 1.33 1.22 1.58

AutoZone's Valuation Is in Line With Its Sector Averages:

AutoZone has a trailing twelve month P/E ratio of 20.0, compared to an average of 22.33 for the Consumer Cyclical sector. Based on its EPS guidance of $146.3, the company has a forward P/E ratio of 16.8. The compound average growth rate of the company's historical and projected earnings per share is 23.2%. On this basis, the company's PEG ratio is 0.86. Alternatively, we can use the weighted average of AutoZone and the broader market's estimated 5-year EPS growth rate. This normalized growth rate of 15.5% gives us a PEG ratio of 1.3, which shows that AutoZone is fairly priced.

Analysts Give AutoZone an Average Rating of Buy:

There are 21 analysts covering AutoZone, with target prices ranging from $1890.0 to $2899.0 per share, for an average of $2700.67. As of April 2023, the company is trading -8.8% away from its average target price, implying there is an analyst consensus of some upside potential. The average rating for AutoZone is buy.

With a 1.5% short interest, AutoZone has a very low short interest. Institutions own 95.6% of the company's shares, and it has a small amount of insider investors because 0.38% are owned by corporate insiders. Overall, the company's top shareholder is the Vanguard Group, Inc., whose 10% stake in the company is worth $4,719,279,257.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.