AUTOZONE INC (AZO): what the price requires
At today's price, AUTOZONE INC (AZO) is priced for -0.6% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-13 · Source: https://boothcheck.com/report/AZO
Headline
| Field | Value |
|---|---|
| Ticker | AZO |
| Company | AUTOZONE INC |
| Current price | $3073.69/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 6.1% |
| Operating margin today | 18.0% |
| Margin compression implied | -11.9pp |
| Implied growth | -0.6% |
| Multiple paid | 19x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.9pp.
Reconcile: at the x-ray's 9.3% required return this reads ~14.9%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -1.57σ |
| cohort percentile (of 210 peers) | 55 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple; earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | — | 0 | — |
| Earnings | 9.81x | 3 | expensive |
| Relative | 1.20x | 2 | expensive |
| Growth | — | 0 | — |
Families that justify the price: Relative Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.
Per-Model Detail (n=5)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $1792.26 | 1.71x | no | FCF base $1.7B, growth 6% (input: historical growth), terminal g 4.0%, WACC 8.2%, 6yr projection |
| DCF Exit Multiple | Growth | $2867.79 | 1.07x | no | Exit EV/EBITDA: 15.1x / 17.1x / 19.1x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $2754.42 | 1.12x | yes | P/E 20x (sector median), scenarios: 16.7x / 20.0x / 23.3x (bear / base = sector held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | — | — | no | — |
| Two-Stage Excess Return | Asset | — | — | no | — |
| Discounted Future Market Cap | Growth | $2442.44 | 1.26x | no | Rev $20.0B, growth 6% (input: historical growth; tapered), Terminal P/S: 2.2x / 2.6x / 3.0x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $1271.71 | 2.42x | no | Normalized EBIT (5y avg op income, one-time charges added back) $3.52B × (1−21%) / WACC 8.2% → EPV (no growth) |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $2381.44 | 1.29x | yes | EBITDA $3.75B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $313.26 | 9.81x | yes | FCF $1633.2M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $225.51 | 13.63x | yes | SBC-adj FCF $1.50B (FCF $1.63B − SBC $0.14B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $761.23 | 4.04x | yes | EPS $145.44 × (8.5 + 2×-1.1%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $1778.99 | 1.73x | no | Revenue $19.99B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $1572.32 | 1.95x | no | EPS $145.44 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $9.2b |
| Net debt / NOPAT (after-tax) | 3.55x |
| Net debt / operating income (pre-tax) | 2.80x |
| Share count CAGR (buyback) | -4.7% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
At $3,063.30 AutoZone trades near 19x company-wide operating income, which implies essentially no operating growth, roughly negative 0.4% a year for five years. For a mature, steady-compounding auto-parts retailer, that is an undemanding bar, and the reverse-DCF base lands well above the price near $4,592.
Read at the right stage, this is a mature cash machine, not a growth story, and the numbers reflect a deliberate strategy. Decades of share buybacks have driven book value negative, which is why the asset frames do not apply and the per-share figures look extreme.
Q3 fiscal 2026 delivered total same-store sales up 3.9% and domestic commercial up 10.4%, with diluted EPS of $38.07. The bet is that the commercial-growth initiative and relentless buybacks keep compounding per-share value even as DIY traffic softens.
Bull Case
AutoZone is a mature, cash-generative retailer, and read at that stage the price is not demanding: at $3,063.30 (June 27, 2026) the market implies essentially no operating growth, roughly negative 0.4% a year for five years. A business that the market expects to barely hold flat is being asked to clear a bar it has cleared for decades. The reverse-DCF base sits near $4,592, well above the price, which is the signature of a quality compounder priced for stagnation.
The operating model is built for steady, recession-resilient demand. Auto parts are non-discretionary, people fix the cars they own when they cannot afford new ones, and AutoZone runs a dense store network with strong inventory availability that turns that demand into reliable sales. Q3 fiscal 2026 showed total same-store sales up 3.9%, domestic same-store sales up 4.1%, and international up 16.6%, with net sales up 8.4% to $4.8 billion and diluted EPS of $38.07. The standout was domestic commercial sales up 10.4%, driven by improved inventory availability and the company's growth initiatives, the segment that extends AutoZone from DIY into the larger professional-installer market.
The capital-allocation engine is the real compounding machine. AutoZone has bought back stock relentlessly for decades, shrinking the share count at roughly 4.7% a year, so even flat operating income produces rising EPS. The FY2025 10-K details the ongoing repurchase activity, including authorization and execution at scale. That is why book value is negative, the company has returned more than its accounting equity to shareholders, and it is a feature of the model, not a distress signal. The company also keeps expanding, opening 82 stores in the quarter toward roughly 365 for the year. For an investor buying a durable cash flow plus a buyback that mechanically grows per-share value, a price implying no growth on a franchise that compounds commercial sales at double digits is the kind of mismatch the static frames miss.
Bear Case
The structural truth a holder would rather not face is that AutoZone has bought back so much stock that its book value is negative, and the per-share growth that looks so impressive is partly financial engineering rather than business expansion. With negative stockholders' equity, several valuation frames cannot even run, the asset-based methods, residual income, and ROIC-justified book all return nothing because there is no positive book value to anchor on. The EPS growth is real, but a meaningful share of it comes from dividing a roughly flat profit pool across a steadily shrinking share count, funded increasingly by debt. Net debt is about $9.2 billion against trailing operating income near $3.6 billion, roughly 2.5x, and interest expense is not separately broken out in the filings, so coverage is hard to verify independently.
The underlying demand picture is softer than the headline. Domestic DIY sales, still the core of the business, grew just 2.2% in Q3 fiscal 2026, and DIY same-store traffic count actually fell 3.6%, meaning fewer customers are walking in and the dollar growth is coming from higher tickets and pricing. Gross margin slipped 57 basis points to 52.2%, pressured by a LIFO impact. A mature retailer leaning on price and on a debt-funded buyback to manufacture per-share growth, while its core foot traffic declines, is a more fragile setup than the steady-compounder framing admits.
The specific risks are the buyback's sustainability and the competitive and macro backdrop. The model the bull case relies on requires AutoZone to keep borrowing to repurchase shares at premium prices; if credit conditions tighten or the business stumbles, that lever loses force, and the company has no equity cushion beneath it. Competition from Advance Auto, O'Reilly, and online parts sellers pressures both DIY and commercial, and the commercial growth initiative is still scaling against entrenched rivals. A new-vehicle sales recovery, an EV transition that reduces the aftermarket parts pool over time, or a consumer that simply defers repairs in a downturn all threaten the volume. The bet the price makes is modest, near-zero growth, but it rests on a balance sheet that has been hollowed out by buybacks and a core DIY channel whose traffic is already shrinking.
Valuation
Inverting the $3,063.30 price gives a benign anchor. At that level the market pays about 19x company-wide operating income, which under a 7.1% cost of capital implies operating growth of roughly negative 0.4% a year, essentially flat. Each one-point change in the cost of capital moves the implied growth by about 7.8 points. The priced-in assumption is characterized as within range, justified by the relative-multiple frame while the earnings-power frame says expensive. The reverse-DCF range runs from a low near $3,778 to a base near $4,592 to a high near $6,703, all above the current price.
The model X-ray is unusually thin because negative book value disables the asset frames. The relative methods support the price: a relative P/E mark near $2,754 on a 20x sector median, a DCF exit-multiple near $2,860, and an EV/EBITDA relative near $2,381. The earnings-power frames sit far lower because they capitalize current free cash flow at zero growth: an FCF-yield mark near $313 and a SBC-adjusted FCF mark near $226, both depressed by AutoZone's working-capital and buyback-heavy cash profile. The simple excess-return, residual-income, Graham-number, and ROIC-justified-book methods all return nothing because book value per share is negative.
The spread is the information. The price is not a verdict on whether AutoZone is a good retailer, its same-store consistency and commercial growth say it is well run. It is a measure of how little growth the market is paying for, essentially flat operating income, with the buyback-driven per-share compounding and the commercial-channel expansion as upside the thin static frames cannot fully capture. The caveat is that the negative equity makes several conservative checks unavailable, so the valuation rests on fewer pillars than usual.
Catalysts
The near-term driver is same-store sales and the commercial ramp. Q3 fiscal 2026 delivered total same-store sales up 3.9%, domestic up 4.1%, and international up 16.6%, with domestic commercial sales up 10.4% on improved inventory availability and growth initiatives. Whether the commercial channel sustains double-digit growth while DIY stabilizes is the swing factor, given domestic DIY grew only 2.2% with traffic down 3.6%.
Seasonal demand is a near-term watch item. Management noted May was cooler but expects a normal-to-hotter summer and a normal seasonal sales lift, since hot weather drives parts failures and demand. Gross margin trends matter too, after a 57-basis-point decline to 52.2% on a LIFO impact.
The structural catalysts are the buyback cadence and store expansion. AutoZone shrinks its share count at roughly 4.7% a year, and the pace and pricing of repurchases drive per-share growth, while the company opened 82 stores in the quarter toward roughly 365 for the year. Watch commercial-sales momentum, DIY traffic, gross-margin and LIFO effects, the buyback pace against net debt near $9.2 billion, and store-growth execution domestically and internationally.
Sources: AutoZone Q3 fiscal 2026 press release (GlobeNewswire) and StockTitan (Q3 net sales $4.8B up 8.4%, total same-store sales up 3.9%, domestic up 4.1%, international up 16.6%, EPS $38.07, buybacks, 82 new stores), GuruFocus and AOL earnings call (domestic commercial up 10.4%, DIY up 2.2% with traffic down 3.6%, gross margin 52.2% with LIFO impact, summer seasonal commentary, ~365 stores planned for the year).
Peer Cohorts (Per Segment, With Filing Citations)
AutoZone (consolidated) (reported)
- ORLY (O Reilly Automotive Inc)
- (no filing in the citation store)
- AAP (ADVANCE AUTO PARTS, INC.)
- (no filing in the citation store)
- GPC (GENUINE PARTS CO)
- (no filing in the citation store)
- LOW (LOWE’S COMPANIES, INC.)
- (no filing in the citation store)
- TSCO (TRACTOR SUPPLY CO /DE/)
- (no filing in the citation store)
- SHW (THE SHERWIN-WILLIAMS COMPANY)
- (no filing in the citation store)
- SBH (SALLY BEAUTY HOLDINGS, INC.)
- (no filing in the citation store)
- BBWI (BATH & BODY WORKS, INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.