Does AutoZone’s Growth Justify Its Current Price After Recent Q3 Earnings Beat?

If you have been watching AutoZone’s rise over the past few years, you might be asking yourself whether the numbers back up another buy or if this is a moment for patience. The stock has earned a reputation among investors for resilience and steady growth. In fact, AutoZone’s share price has jumped 29.2% year-to-date and an impressive 31.3% over the past twelve months, riding a multi-year tailwind of consistent demand in the auto parts sector. Over the last five years, returns are up a staggering 256.7%.

Recently, while the broader market has shown some volatility, AutoZone pushed higher by 1.4% in the past week after a lull in the previous month, keeping near its all-time highs. Much of this optimism traces back to ongoing consumer demand and a broader shift toward DIY car maintenance. Both factors have helped insulate the company from market turbulence. That said, with the current value score sitting at just 1 out of 6 on our valuation checklist, you might be wondering whether AutoZone’s growth story is truly lining up with its price tag.

So, is the stock still a buy at these levels, or has it outpaced its fundamentals? Let's break down the classic valuation metrics, compare how AutoZone stacks up, and then look at an even more effective way to gauge what this company is really worth.

AutoZone scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: AutoZone Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's dollars. This approach is widely used to get a sense of what a business should be worth based on realistic future expectations, excluding market hype.

For AutoZone, the analysis starts with current Free Cash Flow, which sits at $2.18 Billion. Analysts provide detailed forecasts for the next five years, with annual Free Cash Flow expected to grow steadily from $2.29 Billion in 2026 up to $3.37 Billion by 2030. Beyond that, further projections are extrapolated, assuming more modest growth extending into the decade.

Crunching these numbers, the DCF model calculates an intrinsic fair value of $3,410 per share. At current prices, AutoZone is trading about 23.1% above this estimate, making it appear overvalued based on underlying cash generation and future forecasts.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for AutoZone.

Our Discounted Cash Flow (DCF) analysis suggests AutoZone may be overvalued by 23.1%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: AutoZone Price vs Earnings

The Price-to-Earnings (PE) ratio is a time-tested method for valuing profitable companies like AutoZone. It gives a quick snapshot of how much investors are willing to pay for each dollar of earnings, making it especially relevant when steady profits are on display. For established businesses, a higher PE often reflects expectations for future growth or perceived stability, while riskier or slower-growing firms tend to trade at lower multiples.

Currently, AutoZone is trading at a PE ratio of 28x. Compared with the average company in the Specialty Retail industry, which trades at about 17.7x, and a peer group average of 37.2x, AutoZone lands somewhere in the middle. While the industry average offers useful baseline context, it does not account for the company's unique features, such as its growth outlook or consistent margins.

This is where Simply Wall St’s Fair Ratio comes in. The Fair Ratio is our estimate of a reasonable PE for AutoZone, here calculated as 20x, based on factors like earnings growth, profit margins, risk profile, and market cap, all tailored to the company’s situation. This approach gives a more nuanced perspective than simply looking at industry or peer averages.

With AutoZone’s PE at 28x and a Fair Ratio of 20x, the shares appear to be priced above what fundamentals alone would suggest is reasonable.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your AutoZone Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is more than just a forecast; it is a story you tell about a company’s future that starts with your perspective, then clearly links those beliefs to a detailed financial forecast and, finally, to an estimated fair value. Narratives make investing accessible by allowing anyone to input their own expected revenue growth, profit margins, and assumptions, and then see how these beliefs translate into a fair value and investment decision.

On Simply Wall St’s Community page, millions of investors use Narratives to frame and continually refine their investment ideas, building a living connection between a company’s story and financials. By comparing a Narrative’s fair value to the current share price, you can easily judge whether you think the stock is a buy, hold, or sell. Narratives are updated dynamically whenever new data or developments emerge. This way, your view stays relevant as the story changes.

For example, the most optimistic Narrative for AutoZone currently puts fair value at $4,900, while the most cautious values it at just $2,900. This reflects how different investor perspectives and forecasts can create a wide spread of possible outcomes.

Do you think there's more to the story for AutoZone? Create your own Narrative to let the Community know!

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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