QS Research · Michael Burry's Scion Capital analyst template · 2006
AUTOZONE INC (AZO)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $3,217.44 (close 2026-11-10)
Conclusion: LONG
Conviction medium · base case +35% · downside -24% · upside +51%
AZO is marked at 20.1x GAAP and 17.6x operating P/E while the peer median P/E is 27.1x, despite a 28.4% ROIC against a 5.5% WACC, an 8.9% FCF margin and a 3.5% FCF yield (N31, N36, N54, N44, N45, N39, N32). The June 16, 2026 $1.5B buyback authorization and the 2026-09-22 FY2026 release pointing to FY2027 sales acceleration in all three countries are the dated catalysts for a rerated base at 27.1x, worth $4,337.94 or +35% (S38, S5, N54). I assume the downside takes operating earnings down 10% and a compressed ~15.0x P/E, about -23%, while the upside adds 11.6% FY2027 EPS growth at 27.1x, about +51% (N36, S9). FY2026 operating profit growth of only 3.1% and the Q4 tariff/LIFO boost explain the discount, but net debt of $9.22B and $3.67B leases are not overwhelming against $4.41B EBITDA and $1.82B FCF (S5, N24, N23, N15, N19). I call it long with medium conviction.
Key numbers
- Share price: $3,217.44
- Market cap: $51.78B
- Latest financial period: FY Aug 2026 to Aug 29, 2026
- Revenue (FY Aug 2026): $20.34B
- EV / EBITDA (FY Aug 2026): 13.8x
- P/E (FY Aug 2026): 20.1x
- FCF yield: 3.5%
- P/E, operating (tax-normalized) (FY Aug 2026): 17.6x
- EV / FCF (FY Aug 2026): 33.6x
- Revenue growth (latest fiscal year): +7.4%
- ROIC (FY Aug 2026): 28.4%
- WACC: 5.5%
- Economic profit spread: +22.9 pts
The 15 boxes
- ✓ 1. Long-form business notes
AutoZone is a store-based retailer and distributor of automotive replacement parts in the U.S., Mexico and Brazil, with 8,031 stores at August 29, 2026 versus 6,767 at August 28, 2021, and no revenue from repair or installation services. Revenue rose from $14.63B in FY2021 to $20.34B in FY2026 and net income from $2.17B to $2.57B, but operating income went $2.94B → $3.79B (FY2024) → $3.61B (FY2025) → $3.72B (FY2026), so the FY2026 level is below FY2024. The mix has shifted toward commercial delivery (6,443 domestic stores with a commercial program at August 29, 2026 versus 5,179 at August 28, 2021) and toward larger hub/mega hub assortments (172 domestic mega hubs at FY2026 end, +39), funded by capex that rose from $621.8M in FY2021 to $1.43B in FY2026 while operating cash flow was $3.25B.
- ✓ 2. Competitive advantage
AZO shows a scale-and-brand advantage rather than a cost advantage: revenue grew from $14.63B in FY2021 to $20.34B in FY2026 (10-K-cited ~7% CAGR) on a store base up from 6,767 to 8,031, and the 10-K leans on customer service, merchandise availability, commercial delivery speed and owned marks (AutoZone, Duralast, ALLDATA) as the differentiators. Margins do not confirm pricing power: operating income was $3.79B in FY2024, $3.61B in FY2025 and $3.72B in FY2026 on revenue that rose $1.85B over the same two years, and the 10-K itself says its cost structure is higher than some competitors. Competition is broad (national, regional and local chains, online marketplaces, distributors, jobbers, dealers, mass merchants), so the moat is scale, brand and the commercial delivery network, not low price.
- ✓ 3. 10-Q takeaways
Q3 FY2026 (12 weeks ended May 9, 2026) was a strong top line quarter: net sales $4.84B, +8.4%, total company same store sales +5.5% reported / +3.9% constant currency, domestic +4.1%. Gross margin fell 57bp to 52.2% on a 77bp unfavorable non-cash LIFO swing, but SG&A leverage (33.1% vs 33.3% of sales) lifted operating profit 6.6% to $923.8M and diluted EPS 7.7% to $38.07. The nine-month picture is weaker than the quarter: operating profit of $2,406.4M was flat to slightly below last year's $2,414.1M and net income fell $20.1M to $1.6B on a 142bp LIFO hit to gross margin, with EPS up only 0.5%. Cash generation, inventory build, buybacks and a store-count plan of roughly 355-365 openings for the year are the other takeaways; no numeric sales or EPS guidance is given.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
Sign in with a QuantSignals Premium or Gold plan to read every box: each point linked to the SEC filing it came from, the bull and bear case, and the comparables. QS Research powers the signals behind FST, our autonomous trading agent.