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Are Investors Undervaluing AutoZone (AZO) Right Now?

Zacks Equity Research
Aon (AON) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is AutoZone (AZO). AZO is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 16.68, while its industry has an average P/E of 18.64. Over the last 12 months, AZO's Forward P/E has been as high as 16.80 and as low as 10.90, with a median of 13.38.

AZO is also sporting a PEG ratio of 1.39. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AZO's PEG compares to its industry's average PEG of 1.43. Over the last 12 months, AZO's PEG has been as high as 1.40 and as low as 0.80, with a median of 1.07.

Finally, we should also recognize that AZO has a P/CF ratio of 15.34. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 25.34. Over the past year, AZO's P/CF has been as high as 15.44 and as low as 9.89, with a median of 12.16.

These are just a handful of the figures considered in AutoZone's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that AZO is an impressive value stock right now.


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