Let's talk about the popular AutoZone, Inc. (NYSE:AZO). The company's shares led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, could the stock still be trading at a relatively cheap price? Let's take a look at AutoZone's outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for AutoZone
What's the opportunity in AutoZone?
According to my valuation model, AutoZone seems to be fairly priced at around 13.75% 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 $1490.01, then there isn't really any room for the share price grow beyond what it's currently trading. What's more, AutoZone's share price may be more stable over time (relative to the market), as indicated by its low beta.
What kind of growth will AutoZone generate?
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. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 2.8% expected over the next couple of years, growth doesn't seem like a key driver for a buy decision for AutoZone, at least in the short term.
What this means for you:
Are you a shareholder? AZO's future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you've been keeping an eye on AZO, now may not be the most optimal 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.
If you'd like to know more about AutoZone as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for AutoZone (1 can't be ignored!) and we strongly recommend you look at these before investing.
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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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