Shares of the biggest aftermarket automotive elements and equipment retailer in america, AutoZone, Inc. (AZO), have gained 46.1% over the previous yr and 42.5% year-to-date. Furthermore, by way of the 9 months’ efficiency, the inventory has gained 41.6%. AZO hit its 52-week excessive of $1738.78 in yesterday’s buying and selling session. The primary issue contributing to this spectacular rally is the corporate’s bottom-line progress, aided by the rising demand for auto elements because of a booming used automotive market.

Over the previous months, the used automotive market has been increasing like by no means earlier than, as new automotive manufacturing dwindled resulting from provide chain points. Based on Edmunds’s analysis, the typical transaction value (ATP) for used automobiles climbed to $25,410 within the second quarter of 2021 in comparison with $20,942 in the identical interval final yr, marking the best quarterly used ATP Edmunds has on document.

Used vehicles require repairs to maintain working. Additionally, individuals proudly owning vehicles invested in repairs and upkeep to keep away from add-on spending in shopping for new vehicles. The rising demand for aftermarket auto elements bodes resulting from decrease manufacturing for brand new vehicles bodes nicely for AZO.

Right here’s what might form AZO’s efficiency within the close to time period:

Secure Financials

AZO’s internet gross sales elevated 8.1% year-over-year to $4.91 billion within the fiscal fourth quarter ended August 28. Its gross revenue grew 6.4% from the year-ago worth to $2.57 billion, whereas its internet earnings improved 6.1% year-over-year to $785.77 million. The corporate’s EPS elevated 15.5% year-over-year to $35.72.

As well as, AZO repurchased 592 thousand shares of its widespread inventory for $900 million throughout the fourth quarter, rising shareholder worth. The corporate additionally repurchased 2.6 million shares of its widespread inventory for $3.4 billion within the fiscal yr.

Increased-Than-Business Revenue Margins

AZO’s trailing-12-month internet earnings margin of 14.84% is 136% increased than the 6.29% {industry} common. Additionally, the corporate’s levered FCF margin is 144.2% increased than the 7.39% {industry} common.

The corporate’s ROA and ROTC of 14.95% and 27.28% are considerably increased than {industry} averages of 6.28% and seven.56%, respectively.

Moreover, its trailing-12-months money from operations of $3.65 billion is 1,645.5% increased than the {industry} common of $208.96 million.

Regular Progress

AZO’s revenues and internet earnings grew at CAGRs of 9.2% and 17.5% over the previous three years, respectively. Additionally, its EPS grew at a CAGR of 25% over the identical interval. Furthermore, analysts count on AZO’s revenues and EPS to rise 5% and 11.9% year-over-year to $15.3 billion and $108.66, respectively, subsequent yr.

The consensus EPS estimate of $20.47 for the present quarter ending November 2021 signifies a ten% enchancment year-over-year. The corporate’s EPS is anticipated to extend at a 14% CAGR over the following 5 years.

Favorable POWR Rankings

AZO has an total B ranking, which equates to Purchase in our proprietary POWR Rankings system. The POWR Rankings are calculated contemplating 118 various factors, with every issue weighted to an optimum diploma.

The inventory has an A grade for High quality. The corporate’s higher-than-industry revenue margins justify this grade.

AZO has a grade of B for Momentum, justified as it’s buying and selling nicely above its 50-Day and 200-Day shifting averages.

Of the 67 shares within the B-rated Auto Elements {industry}, AZO is ranked #28.

Along with the grades I’ve acknowledged above, one can view AZO scores for Sentiment, Worth, Stability, and Progress right here.

View different top-rated shares within the Auto Elements {industry} right here.

Backside Line

AZO benefited considerably from the rising demand for aftermarket merchandise for the reason that starting of the yr, with the rising used automotive market and rising funding in automotive upkeep. The corporate’s sound financials and excessive profitability ought to maintain traders within the inventory, serving to it maintain hovering within the upcoming months.

How Does AutoZone, Inc. (AZO) Stack Up In opposition to its Friends?

Whereas AZO has a B ranking in our proprietary ranking system, one may wish to think about looking at its {industry} friends, Compagnie Generale des Etablissements Michelin (MGDDY), Bridgestone Company (BRDCY), and Linamar Company (LIMAF) having an A (Robust Purchase) ranking.


AZO shares had been buying and selling at $1,707.25 per share on Thursday afternoon, down $29.75 (-1.71%). Yr-to-date, AZO has gained 44.02%, versus a 16.83% rise within the benchmark S&P 500 index throughout the identical interval.

In regards to the Creator: Subhasree Kar

Subhasree’s eager curiosity in monetary devices led her to pursue a profession as an funding analyst. After incomes a Grasp’s diploma in Economics, she gained information of fairness analysis and portfolio administration at Finlatics. Extra…

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