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AutoZone Inc AZO

Morningstar Rating
$3,035.99 +29.97 (1.00%)
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Company Report

AutoZone's Vast Scale and Product Availability Should Drive Continued Commercial Growth

Amid a highly fragmented aftermarket auto parts industry, wide-moat AutoZone differentiates its retail operations by offering robust customer service to its do-it-yourself (70% of U.S. sales) and commercial customers (30% of U.S. sales) while maintaining ample parts availability across a wide range of vehicle makes and models. Given about 85% of AutoZone’s sales are composed of failure and maintenance related products that tend to be time sensitive and vital to the functioning of a vehicle (such as alternators, batteries, and spark plugs), AutoZone’s customer base typically values service quality and convenience over a lower price. As such, the retailer’s staff often assists customers with the diagnosis of a vehicle, ordering the necessary part for a specific vehicle’s make and model, and in some instances, even replacing and testing the functionality of parts. While online channels (such as Amazon and Carparts.com) and diversified retailers (such as Walmart) may offer ostensibly lower prices, we think AutoZone’s consistent comparable store sales growth and healthy gross margins (north of 50%) suggests its focus on customer service and the convenience provided by its more than 6,300 domestic brick-and-mortar stores is a winning formula in the category.

Price vs Fair Value

AZO is trading within a range we consider fairly valued.
Price
$3,035.99
Fair Value
$9,747.00
Uncertainty
Medium
1-Star Price
$1,587.00
5-Star Price
$8,953.00
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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Trading Information

Previous Close Price
$3,006.02
Day Range
$2,983.093,038.68
52-Week Range
$2,277.883,038.68
Bid/Ask
$3,016.00 / $4,855.96
Market Cap
$52.56 Bil
Volume/Avg
134,815 / 165,209

Key Statistics

Price/Earnings (Normalized)
21.19
Price/Sales
3.13
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
7.81%

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 some instances, installation. The company also operates internationally, with over 750 stores in Mexico and 100 in Brazil.
Sector
Consumer Cyclical
Industry
Specialty Retail
Stock Style Box
Large Core
Total Number of Employees
119,000

Competitors

Valuation

Metric
AZO
GPC
ORLY
Price/Earnings (Normalized)
21.1916.3628.21
Price/Book Value
4.73
Price/Sales
3.130.914.19
Price/Cash Flow
18.2412.2023.33
Price/Earnings
AZO
GPC
ORLY

Financial Strength

Metric
AZO
GPC
ORLY
Quick Ratio
0.090.420.10
Current Ratio
0.791.230.73
Interest Coverage
10.2228.0315.88
Quick Ratio
AZO
GPC
ORLY

Profitability

Metric
AZO
GPC
ORLY
Return on Assets (Normalized)
16.89%7.71%17.86%
Return on Equity (Normalized)
32.31%
Return on Invested Capital (Normalized)
47.36%16.16%44.65%
Return on Assets
AZO
GPC
ORLY
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Specialty Retail Industry Comparables

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Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
ORLY
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TSCO
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ULTA
Ulta Beauty IncFrryvp$26.7 Bil
GPC
Genuine Parts CoKlbyv$20.8 Bil
BBY
Best Buy Co IncYnhhhx$16.8 Bil
WSM
Williams-Sonoma IncJbwg$15.2 Bil
DKS
Dick's Sporting Goods IncCjkbv$14.8 Bil
BBWI
Bath & Body Works IncMlgwbd$10.3 Bil
RH
RH Class ADhmb$5.1 Bil

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