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AutoZone Inc AZO

Morningstar Rating
$2,758.77 +29.08 (1.07%)
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Company Report

AutoZone: Leading Position Among Auto Parts Retailers Prompts Strong Edge, but Shares Are Not Cheap

Despite operating amid a fragmented landscape, we now award AutoZone a wide moat rating, as we have more confidence in the firm’s ability to outearn its cost of capital over a 20-year time horizon. In conjunction, we raised our fair value estimate on AutoZone by 15% to $2,430, from $2,120, due to its moat upgrade and an increase in our top-line forecast that stems from our more optimistic outlook concerning store expansion. We now estimate average annual new store growth of around 2.5% over our 10-year forecast, up from about 1.5%, as we believe the company is well-positioned to consolidate the auto parts retail industry further. We also estimate the firm to post around 3.0% domestic comparable sales growth as AutoZone’s established distribution network should enable it to maintain its lead in the do-it-yourself industry (about 70% of U.S. sales) while expanding its share in the faster-growing commercial aftermarket (30% of U.S. sales). Still, we view shares as modestly overvalued.

Price vs Fair Value

AZO is trading within a range we consider fairly valued.
Price
$2,758.77
Fair Value
$9,158.00
Uncertainty
Medium
1-Star Price
$2,138.80
5-Star Price
$1,722.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

AutoZone should maintain its lead position in the DIY market while leveraging its existing distribution network to capture greater commercial share due to its enviable product availability and speed of service.

Bears

Electrification of the vehicle fleet could prompt less auto parts demand given EVs have fewer moving parts than its internal combustion engine counterpart.

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News

Trading Information

Previous Close Price
$2,729.69
Day Range
$2,742.892,778.98
52-Week Range
$2,277.882,855.21
Bid/Ask
$2,450.00 / $4,414.03
Market Cap
$47.70 Bil
Volume/Avg
109,234 / 154,181

Key Statistics

Price/Earnings (Normalized)
19.79
Price/Sales
2.89
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
8.60%

Company Profile

AutoZone operates as a leading retailer of aftermarket automotive parts in the United States. The firm operates over 6,300 stores domestically, serving both the do-it-yourself and commercial (do-it-for-me) end markets. Through its vast store footprint and distribution network, AutoZone manages a wide array of stock-keeping units applicable to numerous vehicle makes and models, providing its consumers with ample product availability. The firm drives traffic by providing superior and convenient customer service as AutoZone’s team of knowledgeable staff assists consumers with diagnosing a vehicle’s problem, selecting the necessary part for replacement, and in certain instances, installation. The company also operates internationally with over 700 stores in Mexico and 100 in Brazil.
Sector
Consumer Cyclical
Industry
Specialty Retail
Stock Style Box
Mid Growth
Total Number of Employees
119,000

Competitors

Valuation

Metric
AZO
ORLY
GPC
Price/Earnings (Normalized)
19.7927.6615.79
Price/Book Value
4.83
Price/Sales
2.894.050.88
Price/Cash Flow
16.3822.5512.28
Price/Earnings
AZO
ORLY
GPC

Financial Strength

Metric
AZO
ORLY
GPC
Quick Ratio
0.090.080.39
Current Ratio
0.790.691.16
Interest Coverage
10.2216.8326.67
Quick Ratio
AZO
ORLY
GPC

Profitability

Metric
AZO
ORLY
GPC
Return on Assets (Normalized)
16.89%18.14%7.71%
Return on Equity (Normalized)
32.87%
Return on Invested Capital (Normalized)
47.36%45.28%16.48%
Return on Assets
AZO
ORLY
GPC
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Name
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Economic Moat
Market Cap
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ULTA
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TSCO
Tractor Supply CoSydw$25.9 Bil
GPC
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BBY
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WSM
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DKS
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BBWI
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RH
RH Class AFxl$4.7 Bil

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