The Intrinsic Value Podcast - The Investor’s Podcast Network
TIVP007: AutoZone (AZO): Under The Hood w/ Shawn O’Malley
Feb 16, 2025
Dive into the impressive journey of AutoZone, where a mundane auto parts retailer transforms into a financial powerhouse. Discover how the company repurchased over 90% of its shares, showcasing a unique business model thriving against e-commerce giants. Learn about its clever use of mega hubs for inventory management and why customers prioritize service quality over price. Explore the impact of electric vehicles on the market and uncover the intricacies of valuing this resilient stock.
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Quick takeaways
- AutoZone has achieved remarkable financial success through aggressive share repurchases and maintaining high returns on invested capital around 30%.
- The company’s strategic store locations and unique customer service initiatives significantly enhance customer loyalty and drive sales growth.
Deep dives
Strong Historical Performance
AutoZone has demonstrated impressive financial metrics since its IPO in 1991, compounding annual shareholder returns at over 20%. The company maintains high returns on invested capital approaching 30% annually, along with consistent revenue growth of 9% per year over the last decade. One of the driving factors behind its earnings success is the significant share repurchase program, which has reduced outstanding shares by approximately half since 2015, thereby boosting earnings per share. This disciplined financial management has garnered AutoZone a reasonable price-to-earnings ratio of 21, considering its profitability and growth potential.
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