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AutoZone, Inc. Message Board

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  • m.swanger m.swanger Mar 7, 2012 7:07 PM Flag

    Nothing to see here


    What are your comments on why this stock is selling so high but has a negative book value(-$33.26)? Are they really earning +25 per share?

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    • There is an expectation that AZO will continue its run to the 400 mark because the bright analysts want it to but the chart indicates a high RSI value showing into 374. That indicator must back off to well under 70 for the stock to keep moving up to their uber highs. That puts the stock back into the 370's within days. How far it gets sold off is not known. Meanwhile insiders and others are more than happy to take a few million $$ off the top in the last week. Would think more $$ this week.

      The shorts have not taken a great position yet but some expect the stock to get hit before too long. Other similar stocks are rolling off their recent auto highs.

      Caution on this one and the other rich auto parts stocks. There will be time to buy them cheaper. Do your DD and check that steep inclined chart.


    • yeah, once upon a time book value, shareholder value and accounting had a place when investing in corporations via publicly available stock.
      Now, to your point, it doesn't matter. The question to those believers is, should a company enter in debt in excess of its assets to fund stock purchases at levels that some may argue makes poor economic sense. Heck if they kept the cash they have spent in buybacks on the books that alone would be north of $11.2B (vs. current $15B valuation).

      Other argue the stock is like a utility or a tobacco company, using cash flow aggressively and leveraging the balance sheet to reward shareholders. Fact is if you have held the shares for some period the appreciation has been incredible, congrats to Eddie and crew.

      The outstanding question is if this method of "inflating" stock price at the expense of the balance sheet is sustainable in the long run. I would argue it isn't and hence at some juncture the pyramid (stock increases as company buyback shares with additional debt) becomes unsustainable as higher stock price requires increasingly larger amounts of capital impossible to sustain with a "normal" business growth. You understand 1M shares at $150 is much less than 1M shares at $380, not that selling autoparts is growing at double digit rate (it hasn't for a while even under the ideal economic scenario for the autoparts industry).

      I reserve my judgment and we each should reach our own conclusions.

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