U.S. markets open in 4 hours 22 minutes
  • S&P Futures

    4,203.25
    -19.75 (-0.47%)
     
  • Dow Futures

    33,856.00
    -161.00 (-0.47%)
     
  • Nasdaq Futures

    13,890.25
    -91.00 (-0.65%)
     
  • Russell 2000 Futures

    2,296.10
    -14.00 (-0.61%)
     
  • Crude Oil

    71.98
    -0.17 (-0.24%)
     
  • Gold

    1,804.10
    -57.30 (-3.08%)
     
  • Silver

    26.81
    -1.01 (-3.62%)
     
  • EUR/USD

    1.1955
    -0.0046 (-0.38%)
     
  • 10-Yr Bond

    1.5690
    0.0000 (0.00%)
     
  • Vix

    18.89
    +1.87 (+10.99%)
     
  • GBP/USD

    1.3979
    -0.0008 (-0.05%)
     
  • USD/JPY

    110.6410
    +0.0280 (+0.03%)
     
  • BTC-USD

    39,329.22
    -730.97 (-1.82%)
     
  • CMC Crypto 200

    975.90
    -16.57 (-1.67%)
     
  • FTSE 100

    7,145.26
    -39.69 (-0.55%)
     
  • Nikkei 225

    29,018.33
    -272.68 (-0.93%)
     

Is AutoZone, Inc. (NYSE:AZO) Potentially Undervalued?

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
  • Oops!
    Something went wrong.
    Please try again later.

Today we're going to take a look at the well-established AutoZone, Inc. (NYSE:AZO). The company's stock received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on AutoZone’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for AutoZone

Is AutoZone still cheap?

The stock is currently trading at US$1,504 on the share market, which means it is overvalued by 30% compared to my intrinsic value of $1158.02. This means that the buying opportunity has probably disappeared for now. Furthermore, AutoZone’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will AutoZone generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of AutoZone, it is expected to deliver a relatively unexciting earnings growth of 7.1%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in AZO’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe AZO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on AZO for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into AutoZone, you'd also look into what risks it is currently facing. For example, AutoZone has 3 warning signs (and 1 which is significant) we think you should know about.

If you are no longer interested in AutoZone, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.