After reading AutoZone Inc’s (NYSE:AZO) most recent earnings announcement (10 February 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for AutoZone
Commentary On AZO’s Past Performance
I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to analyze different companies on a more comparable basis, using the most relevant data points. For AutoZone, its latest earnings (trailing twelve month) is US$1.34B, which, relative to the previous year’s level, has risen by a relatively subdued 5.25%. Since these figures may be relatively short-term thinking, I’ve determined an annualized five-year figure for AZO’s earnings, which stands at US$1.09B This suggests that, generally, AutoZone has been able to consistently raise its earnings over the last couple of years as well.How has it been able to do this? Let’s see whether it is only a result of an industry uplift, or if AutoZone has experienced some company-specific growth. In the last couple of years, AutoZone grew its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Inspecting growth from a sector-level, the US specialty retail industry has been growing, albeit, at a unexciting single-digit rate of 5.65% in the previous year, and 5.66% over the past half a decade. This suggests that whatever uplift the industry is benefiting from, AutoZone has not been able to leverage it as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as AutoZone gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research AutoZone to get a better picture of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.
- 1. Future Outlook: What are well-informed industry analysts predicting for AZO’s future growth? Take a look at this free research report of analyst consensus for AZO’s outlook.
- 2. Financial Health: Is AZO’s operations financially sustainable? Balance sheets can be hard to analyze, which is why Simply Wall St does it for you. Check out important financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a free list of these great stocks here.