Intrinsic value of AutoZone - AZO

Previous Close

$524.59

  Intrinsic Value

$114.10

stock screener

  Rating & Target

str. sell

-78%

  Value-price divergence*

+2%

Previous close

$524.59

 
Intrinsic value

$114.10

 
Up/down potential

-78%

 
Rating

str. sell

 
Value-price divergence*

+2%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AZO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 14.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.41
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  10,636
  10,849
  11,098
  11,383
  11,704
  12,059
  12,448
  12,872
  13,331
  13,825
  14,356
  14,923
  15,529
  16,174
  16,859
  17,586
  18,357
  19,173
  20,036
  20,947
  21,910
  22,925
  23,996
  25,125
  26,315
  27,567
  28,886
  30,275
  31,736
  33,272
  34,889
Variable operating expenses, $m
 
  8,233
  8,422
  8,637
  8,879
  9,147
  9,441
  9,761
  10,108
  10,481
  10,882
  11,272
  11,729
  12,216
  12,734
  13,283
  13,865
  14,482
  15,133
  15,822
  16,549
  17,316
  18,125
  18,977
  19,876
  20,822
  21,818
  22,867
  23,970
  25,131
  26,352
Fixed operating expenses, $m
 
  522
  535
  548
  562
  576
  590
  605
  620
  636
  652
  668
  685
  702
  719
  737
  756
  775
  794
  814
  834
  855
  876
  898
  921
  944
  967
  991
  1,016
  1,042
  1,068
Total operating expenses, $m
  8,575
  8,755
  8,957
  9,185
  9,441
  9,723
  10,031
  10,366
  10,728
  11,117
  11,534
  11,940
  12,414
  12,918
  13,453
  14,020
  14,621
  15,257
  15,927
  16,636
  17,383
  18,171
  19,001
  19,875
  20,797
  21,766
  22,785
  23,858
  24,986
  26,173
  27,420
Operating income, $m
  2,060
  2,094
  2,142
  2,198
  2,263
  2,335
  2,416
  2,505
  2,602
  2,708
  2,822
  2,984
  3,115
  3,256
  3,406
  3,566
  3,736
  3,917
  4,109
  4,312
  4,527
  4,755
  4,995
  5,250
  5,518
  5,802
  6,101
  6,416
  6,749
  7,100
  7,469
EBITDA, $m
  2,357
  2,407
  2,461
  2,525
  2,597
  2,679
  2,770
  2,870
  2,978
  3,096
  3,224
  3,361
  3,507
  3,664
  3,832
  4,010
  4,200
  4,401
  4,615
  4,841
  5,080
  5,334
  5,601
  5,884
  6,183
  6,498
  6,830
  7,181
  7,550
  7,940
  8,350
Interest expense (income), $m
  137
  174
  87
  93
  100
  108
  117
  127
  138
  150
  162
  176
  190
  206
  222
  240
  258
  278
  299
  321
  344
  368
  394
  421
  450
  480
  512
  546
  581
  618
  658
Earnings before tax, $m
  1,913
  1,920
  2,055
  2,105
  2,162
  2,227
  2,299
  2,378
  2,464
  2,558
  2,659
  2,808
  2,925
  3,050
  3,184
  3,326
  3,478
  3,639
  3,810
  3,991
  4,183
  4,386
  4,601
  4,828
  5,068
  5,321
  5,588
  5,870
  6,168
  6,481
  6,812
Tax expense, $m
  672
  518
  555
  568
  584
  601
  621
  642
  665
  691
  718
  758
  790
  824
  860
  898
  939
  983
  1,029
  1,078
  1,129
  1,184
  1,242
  1,304
  1,368
  1,437
  1,509
  1,585
  1,665
  1,750
  1,839
Net income, $m
  1,241
  1,401
  1,500
  1,537
  1,579
  1,626
  1,678
  1,736
  1,799
  1,867
  1,941
  2,050
  2,135
  2,227
  2,324
  2,428
  2,539
  2,656
  2,781
  2,914
  3,054
  3,202
  3,359
  3,525
  3,700
  3,884
  4,080
  4,285
  4,502
  4,731
  4,972

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  190
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  8,600
  8,770
  8,972
  9,202
  9,461
  9,748
  10,063
  10,406
  10,777
  11,176
  11,605
  12,064
  12,554
  13,075
  13,629
  14,217
  14,840
  15,499
  16,197
  16,934
  17,712
  18,533
  19,399
  20,311
  21,273
  22,286
  23,352
  24,474
  25,655
  26,898
  28,205
Adjusted assets (=assets-cash), $m
  8,410
  8,770
  8,972
  9,202
  9,461
  9,748
  10,063
  10,406
  10,777
  11,176
  11,605
  12,064
  12,554
  13,075
  13,629
  14,217
  14,840
  15,499
  16,197
  16,934
  17,712
  18,533
  19,399
  20,311
  21,273
  22,286
  23,352
  24,474
  25,655
  26,898
  28,205
Revenue / Adjusted assets
  1.265
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
  1.237
Average production assets, $m
  3,685
  3,754
  3,840
  3,939
  4,049
  4,172
  4,307
  4,454
  4,612
  4,783
  4,967
  5,163
  5,373
  5,596
  5,833
  6,085
  6,352
  6,634
  6,932
  7,248
  7,581
  7,932
  8,303
  8,693
  9,105
  9,538
  9,995
  10,475
  10,980
  11,512
  12,072
Working capital, $m
  -450
  -608
  -622
  -637
  -655
  -675
  -697
  -721
  -747
  -774
  -804
  -836
  -870
  -906
  -944
  -985
  -1,028
  -1,074
  -1,122
  -1,173
  -1,227
  -1,284
  -1,344
  -1,407
  -1,474
  -1,544
  -1,618
  -1,695
  -1,777
  -1,863
  -1,954
Total debt, $m
  4,969
  2,474
  2,656
  2,863
  3,096
  3,354
  3,638
  3,946
  4,280
  4,640
  5,026
  5,439
  5,879
  6,348
  6,847
  7,376
  7,937
  8,531
  9,158
  9,821
  10,522
  11,261
  12,040
  12,861
  13,727
  14,638
  15,598
  16,608
  17,671
  18,789
  19,965
Total liabilities, $m
  10,387
  7,893
  8,075
  8,282
  8,515
  8,773
  9,057
  9,365
  9,699
  10,059
  10,445
  10,858
  11,298
  11,767
  12,266
  12,795
  13,356
  13,950
  14,577
  15,240
  15,941
  16,680
  17,459
  18,280
  19,146
  20,057
  21,017
  22,027
  23,090
  24,208
  25,384
Total equity, $m
  -1,788
  877
  897
  920
  946
  975
  1,006
  1,041
  1,078
  1,118
  1,161
  1,206
  1,255
  1,307
  1,363
  1,422
  1,484
  1,550
  1,620
  1,693
  1,771
  1,853
  1,940
  2,031
  2,127
  2,229
  2,335
  2,447
  2,566
  2,690
  2,820
Total liabilities and equity, $m
  8,599
  8,770
  8,972
  9,202
  9,461
  9,748
  10,063
  10,406
  10,777
  11,177
  11,606
  12,064
  12,553
  13,074
  13,629
  14,217
  14,840
  15,500
  16,197
  16,933
  17,712
  18,533
  19,399
  20,311
  21,273
  22,286
  23,352
  24,474
  25,656
  26,898
  28,204
Debt-to-equity ratio
  -2.779
  2.820
  2.960
  3.110
  3.270
  3.440
  3.610
  3.790
  3.970
  4.150
  4.330
  4.510
  4.680
  4.860
  5.020
  5.190
  5.350
  5.500
  5.650
  5.800
  5.940
  6.080
  6.210
  6.330
  6.450
  6.570
  6.680
  6.790
  6.890
  6.990
  7.080
Adjusted equity ratio
  -0.235
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,241
  1,401
  1,500
  1,537
  1,579
  1,626
  1,678
  1,736
  1,799
  1,867
  1,941
  2,050
  2,135
  2,227
  2,324
  2,428
  2,539
  2,656
  2,781
  2,914
  3,054
  3,202
  3,359
  3,525
  3,700
  3,884
  4,080
  4,285
  4,502
  4,731
  4,972
Depreciation, amort., depletion, $m
  297
  313
  319
  327
  335
  344
  354
  364
  376
  388
  402
  377
  392
  408
  426
  444
  464
  484
  506
  529
  553
  579
  606
  635
  665
  696
  730
  765
  801
  840
  881
Funds from operations, $m
  1,640
  1,715
  1,820
  1,863
  1,913
  1,970
  2,032
  2,100
  2,175
  2,256
  2,343
  2,427
  2,527
  2,635
  2,750
  2,872
  3,002
  3,141
  3,287
  3,443
  3,607
  3,781
  3,965
  4,159
  4,364
  4,581
  4,809
  5,050
  5,304
  5,572
  5,854
Change in working capital, $m
  63
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91
Cash from operations, $m
  1,577
  1,726
  1,834
  1,879
  1,931
  1,989
  2,054
  2,124
  2,201
  2,283
  2,373
  2,458
  2,561
  2,671
  2,788
  2,913
  3,046
  3,186
  3,336
  3,494
  3,661
  3,838
  4,025
  4,222
  4,431
  4,651
  4,883
  5,128
  5,386
  5,658
  5,944
Maintenance CAPEX, $m
  0
  -269
  -274
  -280
  -287
  -296
  -305
  -314
  -325
  -337
  -349
  -363
  -377
  -392
  -408
  -426
  -444
  -464
  -484
  -506
  -529
  -553
  -579
  -606
  -635
  -665
  -696
  -730
  -765
  -801
  -840
New CAPEX, $m
  -499
  -69
  -86
  -99
  -111
  -123
  -135
  -147
  -159
  -171
  -184
  -196
  -210
  -223
  -237
  -252
  -267
  -282
  -299
  -315
  -333
  -351
  -371
  -391
  -412
  -433
  -456
  -480
  -505
  -532
  -559
Cash from investing activities, $m
  -506
  -338
  -360
  -379
  -398
  -419
  -440
  -461
  -484
  -508
  -533
  -559
  -587
  -615
  -645
  -678
  -711
  -746
  -783
  -821
  -862
  -904
  -950
  -997
  -1,047
  -1,098
  -1,152
  -1,210
  -1,270
  -1,333
  -1,399
Free cash flow, $m
  1,071
  1,389
  1,473
  1,500
  1,533
  1,571
  1,614
  1,663
  1,717
  1,776
  1,840
  1,899
  1,975
  2,056
  2,143
  2,236
  2,335
  2,441
  2,553
  2,672
  2,799
  2,933
  3,075
  3,226
  3,385
  3,553
  3,730
  3,918
  4,116
  4,324
  4,544
Issuance/(repayment) of debt, $m
  264
  -2,495
  182
  208
  233
  258
  283
  308
  334
  360
  386
  413
  441
  469
  499
  529
  561
  594
  628
  663
  700
  739
  779
  821
  865
  911
  960
  1,010
  1,063
  1,118
  1,176
Issuance/(repurchase) of shares, $m
  -1,372
  1,264
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,053
  -1,231
  182
  208
  233
  258
  283
  308
  334
  360
  386
  413
  441
  469
  499
  529
  561
  594
  628
  663
  700
  739
  779
  821
  865
  911
  960
  1,010
  1,063
  1,118
  1,176
Total cash flow (excl. dividends), $m
  14
  158
  1,655
  1,708
  1,766
  1,829
  1,898
  1,971
  2,051
  2,135
  2,226
  2,312
  2,415
  2,525
  2,641
  2,765
  2,896
  3,034
  3,181
  3,335
  3,499
  3,672
  3,854
  4,047
  4,250
  4,464
  4,690
  4,928
  5,179
  5,443
  5,721
Retained Cash Flow (-), $m
  87
  -2,665
  -20
  -23
  -26
  -29
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -107
  -112
  -118
  -124
  -131
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -2,507
  1,635
  1,685
  1,740
  1,801
  1,866
  1,937
  2,013
  2,095
  2,183
  2,266
  2,366
  2,473
  2,586
  2,706
  2,833
  2,968
  3,111
  3,262
  3,421
  3,590
  3,768
  3,956
  4,154
  4,363
  4,583
  4,816
  5,060
  5,318
  5,590
Discount rate, %
 
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.31
  19.22
  20.18
  21.19
  22.25
  23.36
  24.53
  25.76
  27.05
  28.40
  29.82
  31.31
  32.87
  34.52
  36.24
  38.06
  39.96
  41.96
  44.05
  46.26
  48.57
PV of cash for distribution, $m
 
  -2,243
  1,294
  1,167
  1,043
  921
  804
  693
  589
  493
  406
  328
  261
  203
  155
  116
  85
  60
  42
  28
  19
  12
  7
  4
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

AutoZone, Inc. retails and distributes automotive replacement parts and accessories. It offers various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. The company also provides A/C compressors, batteries and accessories, belts and hoses, calipers, carburetors, chassis, clutches, CV axles, engines, fuel pumps, fuses, ignition and lighting products, mufflers, radiators, thermostats, starters and alternators, and water pumps. In addition, it offers maintenance products comprising antifreeze and windshield washer fluids; brake drums, rotors, shoes, and pads; brake and power steering fluids, and oil and fuel additives; oil and transmission fluids; oil, air, fuel, and transmission filters; oxygen sensors; paints and accessories; refrigerants and accessories; shock absorbers and struts; spark plugs and wires; and windshield wipers, as well as discretionary products, such as air fresheners, cell phone accessories, drinks and snacks, floor mats and seat covers, interior and exterior accessories, mirrors, performance products, protectants and cleaners, sealants and adhesives, steering wheel covers, stereos and radios, tools, and wash and wax products. Further, the company provides a commercial sales program that offers commercial credit and delivery of parts and other products. Additionally, it sells automotive diagnostic and repair software under the ALLDATA brand through alldata.com and alldatadiy.com; automotive hard parts, maintenance items, accessories, and non-automotive products through autozone.com; and accessories, performance, and replacement parts through autoanything.com. As of August 27, 2016, the company operated 5,297 stores in the United States, including Puerto Rico; 483 stores in Mexico; 8 stores in Brazil; and 26 Interamerican Motor Corporation branches. AutoZone, Inc. was founded in 1979 and is based in Memphis, Tennessee.

FINANCIAL RATIOS  of  AutoZone (AZO)

Valuation Ratios
P/E Ratio 12.3
Price to Sales 1.4
Price to Book -8.5
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 14.2
Growth Rates
Sales Growth Rate 4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1.6%
Cap. Spend. - 3 Yr. Gr. Rate 3.8%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity -275.4%
Total Debt to Equity -277.9%
Interest Coverage 15
Management Effectiveness
Return On Assets 15.9%
Ret/ On Assets - 3 Yr. Avg. 16.1%
Return On Total Capital 40.4%
Ret/ On T. Cap. - 3 Yr. Avg. 40.5%
Return On Equity -71.1%
Return On Equity - 3 Yr. Avg. -68.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 52.7%
Gross Margin - 3 Yr. Avg. 52.4%
EBITDA Margin 22.1%
EBITDA Margin - 3 Yr. Avg. 21.9%
Operating Margin 19.4%
Oper. Margin - 3 Yr. Avg. 19.3%
Pre-Tax Margin 18%
Pre-Tax Margin - 3 Yr. Avg. 17.7%
Net Profit Margin 11.7%
Net Profit Margin - 3 Yr. Avg. 11.4%
Effective Tax Rate 35.1%
Eff/ Tax Rate - 3 Yr. Avg. 35.5%
Payout Ratio 0%

AZO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AZO stock intrinsic value calculation we used $10636 million for the last fiscal year's total revenue generated by AutoZone. The default revenue input number comes from 2016 income statement of AutoZone. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AZO stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 11.8%, whose default value for AZO is calculated based on our internal credit rating of AutoZone, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of AutoZone.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AZO stock the variable cost ratio is equal to 75.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $509 million in the base year in the intrinsic value calculation for AZO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for AutoZone.

Corporate tax rate of 27% is the nominal tax rate for AutoZone. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AZO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AZO are equal to 34.6%.

Life of production assets of 13.7 years is the average useful life of capital assets used in AutoZone operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AZO is equal to -5.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-1788 million for AutoZone - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 28.459 million for AutoZone is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of AutoZone at the current share price and the inputted number of shares is $14.9 billion.

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COMPANY NEWS

▶ AutoZone Is Stuck in Neutral -- For Now   [Aug-16-17 11:54AM  TheStreet.com]
▶ The Biggest Loser: Advance Auto Parts Plummets 20%   [Aug-15-17 04:24PM  Barrons.com]
▶ Auto Parts Retailers: Is The Selloff Overdone?   [Jul-20-17 10:38AM  Barrons.com]
▶ These 3 Stocks Look Expensive But Are Actually Cheap   [Jul-18-17 07:27PM  Motley Fool]
▶ 3 Value Stocks for Audacious Investors   [Jul-15-17 09:08AM  Motley Fool]
▶ Auto Parts Retailers Have an Amazon Problem   [Jul-13-17 07:39AM  Motley Fool]
▶ Stocks That Fell to 3-Year Lows in the Week of July 7   [Jul-09-17 06:11PM  GuruFocus.com]
▶ Looking Under the Hood of the Auto Parts Industry Crash   [Jul-08-17 08:10AM  24/7 Wall St.]
▶ O'Reilly Automotive Warns of Slowing Sales   [Jul-05-17 05:13PM  The Wall Street Journal]
▶ Auto stocks drive the blitz   [01:44PM  CNBC Videos]
▶ What Analysts Recommend for AutoZone ahead of 2H17   [Jul-04-17 10:36AM  Market Realist]
▶ Will AutoZone Stock Recover in 2H17?   [09:06AM  Market Realist]
▶ ETFs with exposure to AutoZone, Inc. : June 30, 2017   [Jun-30-17 02:42PM  Capital Cube]
▶ 2 Top Stocks to Buy Before They Rebound   [01:02PM  Motley Fool]
▶ Icahn's push into auto aftermarket space could mean partnering with Amazon   [Jun-05-17 12:15PM  American City Business Journals]
▶ Slow Hiring, 16-Year Low Jobless Rate Shift Fed Outlook   [Jun-02-17 04:13PM  Investor's Business Daily]
▶ Retailers group, AutoZone launch ad campaign on border tax   [Jun-01-17 01:15PM  American City Business Journals]
▶ Consumers Spending More on Homes, Less on Fixing Up Cars   [May-31-17 06:45PM  Motley Fool]
▶ 3 Large-Cap Stocks for the Long Term   [May-30-17 06:40PM  Motley Fool]
▶ Analysts Tout McDonald's, Yum But Cut Ambarella, AutoZone   [04:05PM  Investor's Business Daily]
▶ Retail And E-Commerce News And Stocks To Watch   [11:18AM  Investor's Business Daily]
▶ Jim Cramer on AutoZone's Threat From Amazon   [11:10AM  TheStreet.com]
▶ Why Did AutoZones Margins Fall in 3Q17?   [07:37AM  Market Realist]
▶ Industry News And Stocks To Watch   [02:30PM  Investor's Business Daily]
▶ What Happened in the Stock Market Today   [May-23-17 04:51PM  Motley Fool]
▶ The Biggest Loser: AutoZone Tumbles 12%   [04:46PM  Barrons.com]
▶ AutoZone Tanks On Earnings Miss, Blames Tax Refund Delays   [04:07PM  Investor's Business Daily]
▶ Auto parts drag on retail sector   [02:02PM  CNBC Videos]
▶ Cars, energy, retail & more in the blitz   [01:51PM  CNBC Videos]
▶ AutoZone results fall short of expectations   [01:45PM  American City Business Journals]
▶ Why AutoZone, Inc. Stock Plunged Today   [01:26PM  Motley Fool]
▶ AutoZone results fall short of expectations   [01:25PM  American City Business Journals]
Stock chart of AZO Financial statements of AZO
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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