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Should Value Investors Buy AutoZone (AZO) Stock?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is AutoZone (AZO). AZO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 16.88, which compares to its industry's average of 17.63. Over the last 12 months, AZO's Forward P/E has been as high as 17.36 and as low as 12.02, with a median of 13.89.

Finally, we should also recognize that AZO has a P/CF ratio of 15.32. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 23.14. Over the past year, AZO's P/CF has been as high as 15.75 and as low as 10.61, with a median of 12.49.

These figures are just a handful of the metrics value investors tend to look at, but they help show that AutoZone is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AZO feels like a great value stock at the moment.


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