Today we're going to take a look at the well-established AutoZone, Inc. (NYSE:AZO). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$1,250 and falling to the lows of US$1,129. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether AutoZone's current trading price of US$1,183 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AutoZone’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in AutoZone?
According to my valuation model, AutoZone seems to be fairly priced at around 5.21% above my intrinsic value, which means if you buy AutoZone today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $1124.57, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, AutoZone’s low beta implies that the stock is less volatile than the wider market.
Can we expect growth from AutoZone?
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 8.2%, 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 already priced in AZO’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on AZO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - AutoZone has 1 warning sign we think you should be aware of.
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.
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