why is autozone stock so high

While AutoZone has the largest number of stores, its average store size is smaller than O’Reilly Automotive (ORLY) and Advance Auto Parts’ (AAP) stores. The stock has traded between $1,189.25 and $1,194.86 so … View the latest AutoZone Inc. (AZO) stock price, news, historical charts, analyst ratings and financial information from WSJ. Wiz Raises $100M To Vie With Palo Alto Networks In $8B Market, You’re Killing Us Out There And You Don’t Even Know It, Biden's Infrastructure Bill Could Be $2 Trillion Behemoth—Here's What Goldman Sachs Is Expecting, See the math behind this reverse DCF scenario, Long history of growing faster than its peers, Opportunities for continued domestic and international growth, Superior customer service, which diminishes threats from Amazon (AMZN) and Walmart (WMT), Position to benefit from rising used car sales, rising average age of cars on the road, and the forecasted growth in the number of global vehicles, Stock trading as if profits will permanently decline by 30%, NOPAT margin falls to 13% (10-year average compared to 16% TTM), Revenue declines 1.5% compounded annually for ten years (compared to 3.5% compounded annual consensus estimated revenue growth from 2021 to 2023), NOPAT margin falls to 14% (five-year average compared to 16% TTM), Revenue declines 3.5% compounded annually from 2021 to 2023 (consensus estimates) and grows at 3% a year thereafter, which is below the average global GDP growth rate since 1961 (3.5%), Largest and most profitable firm in its industry, A customer-service intensive offering that non-specialty retailers cannot replicate, Existing relationships with commercial customers, Significant tailwinds for auto part demand: large increase in conventional vehicles and average age of vehicles over the next decade, EVs are not growing fast enough to keep auto part demand from growing, Valuation implies profits permanently decline by 30%, PFS Bretton Fund (BRTNX) – 5.0% allocation and very attractive rating, Fiera Capital U.S. Equity Long-Term Quality Fund (FCUIX) – 4.0% allocation and attractive rating, Invesco Endeavor Fund (ATDCX) – 4.0% allocation and very attractive rating, Clifford Capital Partners Fund (CLIFX) – 3.4% allocation and attractive rating, Fiera Capital Global Equity Fund (FCGIX) – 3.0% allocation and attractive rating. Historically, AutoZone has returned capital to shareholders through share repurchases. Elite money managers, advisors and institutions have relied on us to lower risk and improve performance since 2004. Figure 12 compares the firm’s implied future NOPAT in this scenario to its historical NOPAT. Share buybacks by S&P 500 - Get Report companies totaled more than $567 billion in the 12 months ended Sept. 31, 2014, a 27% increase over the … Here’s a quick summary of what noise traders are missing: Catalysts: A Consensus Beat & Return of Total Vehicle Miles to Pre-COVID Levels. Some analysts say there is still room for it to run. Assuming EVs are 8% of the global fleet in 2030 (as forecast by BloombergNEF), total maintenance spending would grow by 1% compounded annually, as the increase in the number of conventional vehicles offsets the lower maintenance costs of EVs. COVID-19-related disruptions have given many customers more time for DIY projects, which drove higher revenue for AutoZone just as it has for Home Depot (HD) and other retailers that support DIY projects. As investors focus more on fundamental research, research automation technology is needed to analyze all the critical financial details in financial filings as shown in the Harvard Business School and MIT Sloan paper, “Core Earnings: New Data and Evidence”. AutoZone Inc. suffered its biggest-ever stock price plunge Tuesday, with the auto parts and accessories retailer’s disappointing results prompting a two-notch downgrade from a … Figure 1 compares AutoZone’s year-over-year (YoY) domestic same store growth to the U.S. auto part retail sales growth. AutoZone's ROCE is boosted somewhat by its middling amount of current liabilities. The following competitive advantages help AutoZone grow its market share over the long term: These days, fewer investors focus on finding quality capital allocators with shareholder friendly corporate governance. The firm has two websites, one for retail and one for commercial customers, that offer in-store pickup or delivery, which is next-day for 80% of the U.S. Valuation: I made $11.1 billion of adjustments with a net effect of decreasing shareholder value by $8.6 billion. Used car trends. AutoZone has also consistently grown its international stores as Mexico and Brazil stores represent 10% of total stores in 2020 compared to 5% in fiscal 2010. Despite the decline in seasonally adjusted VMT, AutoZone’s sales in fiscal 2020 reached an all-time high. Figure 8: Core Earnings & Revenue Growth Since 2010. AutoZone’s ability to provide specialized customer service that its big box retailer and e-commerce competitors cannot match gives it a major competitive advantage. AutoZone’s operating, selling, general & administrative expense have fallen as a percent of revenue from 37% in fiscal 2018 to 34% in fiscal 2020. Scenario 1: In this worst-case scenario, I assume: In this scenario, AutoZone’s NOPAT declines 2% compounded annually over the next 10 years, and the stock is worth $1,152/share today – near the current stock price. In other words, the number of new conventional vehicles on the road will increase nearly twice as much as the number of EVs. While much of the decline in VMT appears to be attributable to short-term pandemic-related disruptions, many are concerned that the rise of work from home will keep VMT low. This worst-case scenario implies AutoZone’s NOPAT a decade from now will be 32% below its fiscal 2020 NOPAT. At the end of fiscal 2020, AutoZone had $796 million remaining under its authorization to repurchase shares. Customer Service Provides a Moat Against Retail Giants. Like most specialty retailers, AutoZone faces competition from auto-part store peers as well as big box retailers and e-commerce giants like Walmart (WMT) and Amazon (AMZN). The company said it earned $289 million, $8.47 per share when adjusted and fully diluted , on revenues of $2.413 million. According to Zacks, AutoZone beat EPS estimates in 10 of the past 12 quarters and doing so again could send shares higher, especially in the current uncertain economic environment. There might be better investments than AutoZone … AutoZone … Over the past twelve months, insiders have bought a total of 5 thousand shares and sold 89 thousand shares for a net effect of 84 thousand shares sold. If AutoZone … AutoZone has a fifty-two week low of $684.91 and a fifty-two week high of $1,297.82. If this short-term trend turns into a long-term shift in consumer behavior, the firm is positioned to continue to enjoy even more growth. Since 2015, AutoZone’s domestic same store sales have grown by 3.1% compounded annually compared to just 1.8% compounded annual growth for the U.S. auto parts retail market. … “What’s been driving this stock the last really 18 … COVID-19-related disruptions led to a dramatic decline in seasonally adjusted vehicle miles traveled (VMT) in the U.S. See client testimonials and media coverage. But that's what you'll pay for one share of Amazon now. Terms of investing in why is autozone stock so high. He is author of the Chapter “Modern Tools for Valuation” in The Valuation Handbook (Wiley Finance 2010). In this scenario, I assume the same margins as Scenario 1, but revenue grows by 5.1% compounded annually (or the forecasted global automotive aftermarket (CAGR). Figure 2: Average Age of U.S. Light Vehicles Since 1996. The Bottom Line On AutoZone's ROCE . For the purposes of choosing an investment, lower is better. AutoZone keeps managers focused on creating value for shareholders by linking its executive compensation plan to return on investment (ROIC). Pour autoriser Verizon Media et nos partenaires à traiter vos données personnelles, sélectionnez 'J'accepte' ou 'Gérer les paramètres' pour obtenir plus d’informations et pour gérer vos choix. Note that the implied 2030 revenue in Scenario 1 is 50% below the implied revenue in Scenario 2. AutoZone’s superior profitability drives the firm’s consistent growth in core earnings[2]. Informations sur votre appareil et sur votre connexion Internet, y compris votre adresse IP, Navigation et recherche lors de l’utilisation des sites Web et applications Verizon Media. Per Figure 6, AutoZone generates more revenue per square foot of store space than O’Reilly Automotive and Advance Auto Parts. Only our “novel database” enables investors to overcome those flaws and apply reliable fundamental data in their research. All Rights Reserved, This is a BETA experience. The all-time high AutoZone stock closing price was 1282.15 on January 12, 2021. Critical Details Found in Financial Filings by My Firm’s Robo-Analyst Technology. The AutoZone 52-week low stock price is 684.91, which is 41% below the current share price. Find more papers here. You may opt-out by. Our proprietary measures of Core Earnings and Earnings Distortion materially improve stock picking and forecasting of profits. AZO: Get the latest AutoZone stock price and detailed information including AZO news, historical charts and realtime prices. The low and falling short interest indicates not many investors are willing to bet against this firm. Increasing investment in digital opportunities could boost AutoZone Inc.'s (AZO) stock performance. Perhaps, the biggest concern bears have with auto parts retail growth is the growing adoption of electric vehicles (EV). I think the average age of vehicles on the road will continue to rise as used cars sales rise. BloombergNEF expects there will be 200 million more conventional vehicles on the road by 2030 while the number of EVs increases by only 108 million. In this case, smaller seems to be better. Figure 10 compares the firm’s implied future NOPAT in this scenario to its historical NOPAT. He was a 5-yr member of FASB's Investors Advisory Committee. While it is true that EVs have fewer parts and lower maintenance costs, their maintenance costs are only 26% lower than conventional vehicles[1]. This ratio means the market expects AutoZone’s NOPAT to permanently decline by 30%. footnotes) of hundreds of thousands of corporate financial filings to reveal critical details that drive uniquely comprehensive and independent credit and equity investment ratings, valuation models and research tools. In any scenario better than this one, AZO holds significant upside potential, as I’ll show below. Why is AutoZone stock so high? Earnings Beat In The Cards For Target Stock? Even if the EV fleet is 56% of the global fleet in 2030, total maintenance spending still equals 2020’s level of $1.5 trillion. View real-time stock prices and stock quotes for a full financial overview. Executive Interests Are Aligned With Shareholders’. AutoZone, Inc. (AZO) stock is trading at $1,193.90 as of 9:42 AM on Thursday, Jan 2, a gain of $2.59, or 0.22% from the previous closing price of $1,191.31. AutoZone’s current economic book value is $1,757/share – a 51% upside to the current stock price. It currently has 5651 stores in the U.S., 568 stores in Mexico and 22 stores in Brazil. This expectation seems overly pessimistic over the long term. AutoZone… Per Figure 2, the average age of light vehicles on the road in the U.S. has steadily climbed from 8.5 years in 1996 to 11.9 years in 2020. Its current price-to-economic book value (PEBV) ratio of 0.7 is the cheapest since 2017. When investing in a tool like stocks, you need to focus on a long term: a few years or a few dozen years. Figure 10: Current Valuation Implies Severe, Long-Term Decline in Profits: Scenario 1, Current Share Price Means NOPAT Falls to 2016 Levels. Only in this case … Below are specifics on the adjustments I make based on Robo-Analyst findings in AutoZone’s fiscal 2020 10-K: Income Statement: I made $517 million of adjustments, with a net effect of removing $305 million in non-operating expenses (2% of revenue). Figure 5 shows the forecasted growth of conventional vehicles and EVs from 2020 to 2030. Most importantly, lower VMT has not translated to lower sales for AutoZone. Autozone stock closed at $654.47 on Tuesday. For reference, AutoZone has grown NOPAT by 9% compounded annually over the past two decades. The Journal of Financial Economics reveals: 1. The firm increased its core earnings margin from 10% in 2010 to 14% in 2020. Even so, it has a great ROCE, and could be an attractive prospect for further research. While the firm has consistently grown revenue, it has also reduced expenses. Découvrez comment nous utilisons vos informations dans notre Politique relative à la vie privée et notre Politique relative aux cookies. Two reasons why the market might be missing a trick with Autozone Inc 19th Jan by Ben Hobson Buying quality merchandise when it's on sale is a stock market strategy used by some of the … No matter the macro environment, investors should look for companies with executive compensation plans that directly align executives’ interests with shareholders’ interests. In this article, I give 16 reasons as to why I believe this is a good stock to own for the long-term. ft Than O’Reilly & Advance Auto Parts. Image source: Getty Images. So why is Amazon stock so … Figure 9: Stock Price vs. Economic Book Value (EBV) per Share, AZO’s Current Price Implies 30% NOPAT Decline. Abercrombie & Fitch Stock To Trade Lower Post Q4? The average age of a used car in the U.S. is at an all-time high of 11.4 years …

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