AutoZone is the leading US distributor ($ 11bn in sales) of auto parts
and accessories with more than 5,000 stores in the United States, Puerto Rico,
Mexico and Brazil. Each store has a wide range for cars, sport utility
vehicles, vans and light vehicles, including new and refurbished rigid parts,
maintenance items and accessories.
The first store opened in Forrest City, Arkansas on July 4, 1979
under the name Auto Shack. The company changed its name in 1987.
The company also distributes parts and accessories on its website
and on an Apple and Android application.
There is also diagnostic software and car repair (external growth
in 1996).
AutoZone opens an average of 180 stores each year and operates
without a franchise (35 openings in the United States in Q3 of the current year
+ 8 in Mexico, 205 openings in 2016).
In Q3, its 5889 stores are distributed as follows:
United States: 5381
Mexico: 499 (established since 1998)
Brazil: 9 (since 2012)
They own land and walls, resell or sublease to other types of
businesses when they want to close / move the store.
"Admittedly not to have understood this activity, it still
represents $ 1 billion in sales in 2011.
EDIT :
An article on SeekingAlpha allowed me to understand it:
SeekingAlpha translated by Google wrote:
In addition, many specialty shops in a commercial sales program provide
commercial credit and prompt delivery of items and other products to local,
regional and national repair garages, dealers, service stations and accounts.
public sector.
In 2012 AutoZone acquires AutoAnything, an online store of
specialized automotive products.
Evolution of sales since 1994
Growth slowed sharply to measure a critical size is reached, but
the international market is at these early stages and the US is still growing
slightly.
Gross margin and operating profit (EBIT) constantly increasing
since 1993 (Price Power)
EPS evolution since 2002 (lively share buybacks ... among other
things of course)
Here are the financial data of xlsValorisation:
For the number of titles, the choice according to the data source
between, 28.16 (WSJ introductory page), (28.41 FT), 29.0 (AZO T3 2017), 29.3
(AZO cumulation Q3 2017) and 30 (2016 valuation, therefore WSJ Income
Statement).
This is the problem with the companies buying back their shares, on
never know how much there is !! I took 29.30 for security (plus there is one
more is twofold) but I think the fairest would have been 29.0. The gap is small
and plays only $ 4 on valuation.
Superb foundations
Solvency ratios that seem to me quite correct (net debt twice the
EBITDA (Kellogg's is 3.5) and very important coverage of financial charges)
Very high distribution ratios (too much?). No dividend, only
repurchase of shares, which is very good for the capitalization and
reinvestment (staff) in the company.
Does this mean that the company is going into debt to buy back its
own shares?
I think so, it is a risky practice in the event of a turnaround.
The content of the AMHJ document at (2 x EBITDA), the magnitude of
the ROIC (above 40%) and the average cost of capital less than 8% (3.1% gross,
2.0% net) I think that is very accretive.
Profitability ratios
The gross margin and the MOP are consistent between xlsValorization
and AZO presentations.
FCF margins and profit margins are correlated: a sign of the
"reliability" of the net result.
The ROE is negative and inoperative, normal for a company buying up
its shares massively.
ROIC & CROIC are excellent even if the trend is constrained.
Note that AZO estimates its ROIC around 32%. I did not have fun
peeling the calculation but as for Nike we note this difference of method.
It should also be noted that cash is still capped at $ 200 million.
This is a sign that I believe it is well used and invested in profitability between
new store openings and share buybacks ($ 1.2 billion / year on average over the
last 5 years).
Finally, the IH Score is perfect in a positive trend:
For comparable I used 4 lists, Morningstar, Infinancials, Google
and .... Become an Annuitant!
The selected companies are:
O'Reilly Automotive Inc
Advance Auto Parts Inc
CarMax Inc
Genuine Parts
Regarding the comparable attention to the suffix NSQ (here ORLY) if
you enter it in the green box and then click on the "change" button,
xlsValorization will default the suffix to "NYQ" (like most US
values) and if you do not pay attention the beta will not be recovered by the
tool.
Historical multiples (since 2011, I still exclude the beach 2007 -
2010 available on Morningstar but potentially biased by the context)
A reflection on the historical PERs below:
The lowest PER was 12.8 in 2009 (financial crisis), otherwise 13.6
in 2007. The highest was 20 in 2015.
I allow myself to quote a sentence from the book Devenir Rentier de
Philippe:
IH wrote:
Cyclical companies alternatively turn big and small profits
according to economic cycles. It is at the top of the cycle that their profits
are the highest and the PER the most
low ; and at the bottom of the cycle their profits are the lowest
and therefore the highest PER. Thus, for cyclical companies, often the lower
the PER, the less time to buy!
Are auto part retails as cyclical as car manufacturers? This does
not affect the AZO figures even in the long term (since 1990).
I do not really know what to think, the current PER of 14 TTM would
mean an end of cycle, but the highest (beginning of cycle?) Was barely 2 years
ago.
This PER TTM is mainly linked AMHA to the sharp drop in the price
since January (-25% to the ladle).
It itself related to results rather good (in my opinion) but not as
good as expected. Same late 2016.
What made me think of the Stock Exchange Newsletter # 141 -
Challenge the daily media-financial noise
In short, I decided not to take into account because my
interpretation of these news is more positive than the players in the
"market".
Source
For EPS xlsValorization takes the net result N-1 divided by the
current number of shares.
According to the sources I found the following estimates:
41.7 (cumulative EPS over 36 weeks 2017/36 weeks * 52 weeks)
43.2 (marketwatch)
44.36 (EPS N-1 + 9% since it is this evolution which is recorded
cumulatively in Q3 = chosen solution)
45.8 (the Q3 x 4 but the activity seems seasonal and therefore not
retained).
At the free discretion of everyone ...
The turnover is the cumulative 2017/36 x 52 (method difference of
EPS but more conservative result than other methods)
The EBIT + rate is the cumulative 2017 (lower than the estimate of
xlsValorization) as well as the tax rate and the debt.
The difference between the NOPAT and the Net Income of the
presentation is that the NOPAT does not take into account the interest expense.
Discount rates
As usual I prefer historical rates.
For the beta I used the industry "Retail Automotive",
because the beta of the industry "Auto Pärts" seemed to me very high
(1.37) compared to that of the company.
I took the highest between Damodaran and that of society.
I could have taken Auto Parts and let xlsValorisation average the
two models, we would be at a beta of 0.99 is more favorable than my estimate.
Growth in operating profit
Who gives us the valuation
The valuation shows a high uncertainty (ie the beta is greater than
1).
The Damodaran beta is based on the industry and the weight of the
company's debt, but given the historical beta of the company, this uncertainty
is AMHA to relativize.
If we use the average of the 2 betas (as does xlsValorization of
origin) with the beta of the Auto Parts industry, an average of 0.99, the
uncertainty becomes normal and the recommended price for the purchase is at
only -7% versus yesterday, the intrinsic value ($ 705) estimates a margin of
safety of 16% and an upside objective of 27%.
I valued briefly (by historical multiples + comparable + normalized
data estimated by xlsValorisation):
O'Reilly at $ 214 for a $ 234 course despite a 52 week low! IH
Score 9 positive
Advance Auto Parts Inc. at $ 138 for a course at $ 130 IH Score 6.5
negative (considering the accounts not extraordinary I do not want to dig ...)
CarMax Inc. at $ 6 for a $ 62 course !!!! IH Score 5.8 stable (=
strongly negative FCF, indebted to 17 times EBITDA and big beta ...)
Genuine Parts at $ 89 for a course at $ 94 IH Score 6.5 stable
autozone hours
battery
careers
promotions
phone number
jobs
locations
stock
rewards
tool rental
coupons
near me
ad
antifreeze
app
around me
air filter
austin
application
auto parts near me
alternator
anaheim
near me
a/c recharge
a street antioch ca
a/c recharge kit
a/c check
a/c compressor
a st auburn wa
a/c gauges
battery charger
battery test
battery warranty
battery coupon
boise
battery installation
brooklyn
business hours
b&m shifter
yb16cl-b autozone
yb30cl-b autozone
16cl-b autozone
yb30l-b autozone
555-104-b autozone
b-12 chemtool autozone
r and b autozone
b series starter autozone
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