Is AutoZone Stock Undervalued or Overvalued Before Earnings?

by Rob Otman
autozone stock autozone earnings 0

AutoZone (NYSE: AZO) is a $16 billion company today. Investors that bought shares one year ago are sitting on a -26.09% total return. That's below the S&P 500's return of 15.11%.

AutoZone stock is underperforming the market. It's beaten down, but it reports earnings soon. So is it a good time to buy? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: AutoZone reported a recent EPS growth rate of 6.46%. That's below the specialty retail industry average of 35.04%. That's not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the specialty retail industry is 22. And AutoZone's ratio comes in at 12.53. It's trading at a better value than many of its competitors.

Debt-to-Equity The average price-to-earnings ratio of the specialty retail industry is 22. And AutoZone's ratio comes in at 12.53. It's trading at a better value than many of its competitors.

Free Cash Flow per Share Growth AutoZone's FCF has been lower than that of its competitors over the last year. That's not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins The profit margin of AutoZone comes in at 12.67% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. AutoZone's profit margin is above the specialty retail average of 6.82%. So that's a positive indicator for investors.

Return on Equity Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for AutoZone is -70.08%, and that's below its industry average ROE of 21.53%.

AutoZone stock passes two of our six key metrics today. That's why our Investment U Stock Grader rates it as a Hold With Caution.

autozone stock autozone earnings 2

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you're interested in finding Strong Buy stocks yourself, check out 3 Powerful Technical Indicators for Smarter InvestingWe’ll show you how to eliminate emotional bias from your trading process with three powerful technical tools you can start using to boost your trading profits immediately. Click here to learn more

IU Stock Grader