InvestorsObserver gives AutoZone, Inc. (AZO) a strong valuation score of 78 from its analysis. The proprietary scoring system considers the underlying health of a company by analyzing its stock price, earnings, and growth rate. AZO currently holds a better value than 78% of stocks based on these metrics. Long term investors focused on buying-and-holding should find the valuation ranking system most relevant when making investment decisions.
AZO's trailing-12-month Price to Earnings (PE) ratio of 13.4 puts it around the historical average of roughly 15. AZO is a average value at its current trading price as investors are paying around what its worth in relation to the company's earnings. AZO's trailing-12-month earnings per share (EPS) of 86.32 does justify what it is currently trading at in the market. Trailing PE ratios, however, do not factor in a company's projected growth rate, resulting in some firms having high PE ratios due to high growth potentially enticing investors even if current earnings are low.
AZO's 12-month-forward PE to Growth (PEG) ratio of 1.63 is considered a poor value as the market is overvaluing AZO in relation to the company's projected earnings growth due. AZO's PEG comes from its forward price to earnings ratio being divided by its growth rate. A PEG ratio of 1 represents a perfect correlation between earnings growth and share price. Due to their incorporation of more fundamentals of a company's overall health and focusing on the future rather than the past, PEG ratios are one of the most used valuation metrics by analysts today.
All together these valuation metrics paint a pretty poor picture for AZO at its current price due to a overvalued PEG ratio due to strong growth. The PE and PEG for AZO are worse than the average of the market resulting in a valuation score of 78.