AutoZone, Inc. (AZO)

I PREDICT THAT THE EMPLOYEE UNION THAT IS CURRENTLY ON THE DRAWING BOARD WILL IN THE SHORT TERM CAUSE A RAPID DOWNTURN IN THE COMPANY STOCK VALUE AND THIS COULD LAST THROUGH THE UPCOMING YEAR. BY THE END OF 2011 AUTOZONE WILL LAND FIRMLY ON BOTH FEET CREATING AN ENVIORNMENT BETWEEN THE HEADQUARTERS AND EMPLOYEES UNION THAT ENVIGORATES SALES NUMBERS AND ACTUALLY SHOWS SIGNS OF OUTPERFORMING SOME OF ITS BEST YEARS NUMBERS.

Autozone should benefit from the reduction in new car sales causing more car repairs. This near term performance is already built into the stock price. At the end of the day though, Autozone is a retailer. They are a retailer with an enterprise value to revenue ratio of 1.45. Typical EV/rev ratios for retailers hover around 0.5.

I think a lot of people will not be able to afford new cars for several years. So they will be forced to fix what they have

Cash for clunkers new cars are under warranty

Think the stock has gotten ahead of itself.

Ford Strong Buy, S&P (4 or 3 stars), Member of S&P 500

cfc

check out earnings growth. last quarter was 90% increase over previous qt. what more can you ask.

I'm going to join the red thumb bandwagon here.

WAY, way too much debt and a big chunk of it is coming due in December.

I smell a Chapter 11 BK coming here in 3rd or 4th quarter 2009.

They also have failed to destock inventory. Apparently they haven't got the memo on the declining aggregate demand. From what I can see the only adjustment they have made to the new economic reality is that they have started paying their bills slower to try and raise cash.

Pathetic.

I guess leopards never change their spots. This company has had troubles before and it looks like they will again. Soon in fact.

I smell fraud

top education stock - great place to be for next year or so

EVERYONE NEEDS TO KEEP THEIR OLD HEAP RUNNING...THEY AIN'T BUYING NEW CARS, KEEPING THE OLD.

Pluses: Right now it is below it's moving average, the trend is up. Positive and increasing net income ($641M) and cash flow ($156M). Quarterly revenue increased 9.3% and quarterly earnings increased 9.5%. Gross margins and EPS best among major competitors.
Minuses: P/E is at 13.21 ( little too high but best among major competitors and is acceptable).

good stock

Nice debt!

I firmly believe this company well go down in flames eventually; however, it is likely going to be a loooong bumpy ride. There is a lot of upwards momentum associated with AZO because people are simply holding onto their cars longer and looking for parts during this economic slump. This is a large trend to bet against, but IMO AutoZone is one of the weaker comapnies in this industry.

I feel this is an attractive entry point because the chart is currently pointly down and it may be time for a breakout to the downside. There has been a decent amount of resistance around 155 on the chart, which was slightly taken out today (5.28.09). So why not, now is as good a time as any to start this long term red thumb.

Upthumb. Excellent cash flow, no debt. But valuation too high.

GOOD STOCK

When I made my initial recommendation back in 7/08, I looked at this stock as a value play without having the tools in place to make that judgment properly. In retrospect, I might not have made the recommendation because it would have failed one of my tests (that the (earning + dividends) / price >= 15%). I am now re-evaluating with tools in place. The analysis presented is based on a current price of $164.65.

If this were an actual investment instead of CAPS, I probably would have exited part of my position by now. My initial “take profits” target for this stock was at $150.

Until this past year, the EPS has been growing since 2001. The compounded annual growth (CAGR) has been 53%. The ROE, however, has been unreal during this period. The low year is 2001 with 20%, the next low year was 2002 with 62%, and since then each year has exceed an ROE of 100%. The TTM ROE is over 1000%.

The company has $2.3 B in debt, but has maintained a current ratio (current assets/current liabilities) of about 1 (± .05) for the last 8 years. To further evaluate financial safety, I looked at three general indicators. For this stock, two are within safe boundaries and close to meeting the best criteria, while the third is cautionary, though close to being in the safe range. The Altman Z is 2.97 and is the one that is cautionary; below 1.8 is risky, above 3 is the safe range. The Piotroski F is 7; 2 or below indicates caution, while 8 or 9 indicates that the stock is expected to rise within the next year. The Sloan accrual is -4.9; 5 or higher is high risk, while -5 or lower is excellent.

I use more than one valuation method to gauge intrinsic value. The first three are standards in the valuation literature; all of the standards provide a substantial margin of safety (MOS). The estimate based on Graham’s formula was $261 (37% MOS). The Earnings Power Value (value of the firm) was estimated, on a per share bases, to be $456 (64% MOS). The Discounted Cash Flow estimate valued the stock at $247 (33% MOS).

The last two were based on a spreadsheet found on the AAII website; these are designed to mimic Buffett’s valuation methodology. One is based on projecting EPS growth 10 years into the future based on past EPS growth; I discount the resulting valuation to reflect the price at which the stock will realize a compounded earnings (including dividends when applicable) return of 15%. Based on this method the target purchase needs to be below $149, and the stock is currently above that price.

The second is based on estimating EPS growth through the sustainable growth rate. The per-share projected book value is estimated by taking the previous year’s book value, adding EPS and subtracting dividends (when applicable). The projected EPS is estimated by multiplying the projected book value by the average Return on Equity, and the projected dividend is estimated by multiplying the projected EPS by the average payout ratio. I then discount the resulting valuation to reflect the price at which the stock will realize a compounded earnings return of 15%. Because the average ROE was 154% for the 8 years, the result based on this method was an outlandish $31,521 (this is the maximum target price to assure a compounded return of 15%). Further examination led me to believe that any valuation estimate based on ROE or book value for AZO is not trustworthy.

Based on fundamentals, indicators of safety, and valuation, AZO could be a buy depending on how much MOS is required, but having “bought” at $119, the stock rates to be a hold for me.