AZO 2953.64 (-0.14%)
US0533321024Retail - CyclicalSpecialty Retail

Last update on 2024-06-06

AutoZone (AZO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

AutoZone (AZO) has a Piotroski F-Score of 6/9 for 2023, reflecting its financial strength. Discover an in-depth analysis focused on profitability, liquidity, and operating efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 6

We're running AutoZone (AZO) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score helps investors by highlighting how financially strong a company is, scored out of 9. AutoZone (AZO) received a score of 6. The analysis covers profitability, liquidity, and operating efficiency: 1. Profitability: AutoZone has a positive net income ($2.5 billion) and cash flow from operations ($2.9 billion), though return on assets slightly decreased. 2. Liquidity: AutoZone saw a slight rise in its current ratio but increased leverage. Also, shares outstanding reduced, showing buybacks. 3. Operating Efficiency: Gross Margin decreased slightly, but the Asset Turnover ratio saw a positive growth.

Insights for Value Investors Seeking Stable Income

While AutoZone's Piotroski F-Score of 6 is strong, indicating overall good financial health and growth potential, some areas could be improved, such as the liquidity and leverage. The consistent positive net income and efficient asset utilization are promising. Investors should consider looking into AutoZone, keeping an eye on its operational efficiencies and managing debt levels.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of AutoZone (AZO)

Company has a positive net income?

Net income shows a company's profitability and ability to generate earnings, which are intracally linked to its financial health and long-term viability.

Historical Net Income of AutoZone (AZO)

In 2023, AutoZone (AZO) reported a net income of $2,528,426,000, which is indeed positive. This represents a continuation of a remarkable upward trend over the last 20 years. Starting from a net income of $517,604,000 in 2003, the company has consistently improved its profitability, reflected in the latest 2023 figure of over $2.5 billion. Among the notable jumps was a substantial increase in 2021 where the net income surged to over $2 billion for the first time. This positive trajectory signifies a robust financial performance and contributes to a positive Piotroski score for this criterion. As a result, AutoZone earns 1 point for having a positive net income.

Company has a positive cash flow?

One of the key indicators of a company's financial health is its cash flow from operations (CFO).

Historical Operating Cash Flow of AutoZone (AZO)

In 2023, AutoZone's cash flow from operations stands at $2,940,788,000, which is positive. Over the last 20 years, AutoZone has consistently maintained a positive trend in its CFO, with figures steadily rising from $698,255,000 in 2003 to the current value. This sustained positive cash flow indicates effective management and operational efficiency. This trend is bullish for the company and earns a full point on the Piotroski scale as it signifies the company's ability to generate cash from its core business activities.

Return on Assets (ROA) are growing?

Return on Assets (ROA) is a profitability ratio that measures how efficiently a company can manage its assets to produce earnings. An increase in ROA indicates improved efficiency at generating profits from investments in its assets.

Historical change in Return on Assets (ROA) of AutoZone (AZO)

In 2022, AutoZone had an ROA of 0.1631, which slightly decreased to 0.1618 in 2023. This decrease, although minimal, signifies a slight dip in the efficiency of the company in generating earnings from its assets. While a small change, the trend is negative, setting the Piotroski score to 0 for this criterion. Furthermore, a comparison with the industry median ROA, which stood at 0.3785 in 2023, shows that AutoZone is underperforming compared to its peers. Historically, AutoZone has maintained a stable ROA but has generally lagged behind the industry average. Despite strong operating cash flows over the years, the decline in ROA indicates that there’s room for AutoZone to further optimize asset utilization to boost profitability.

Operating Cashflow are higher than Netincome?

This criterion examines whether a company’s operating cash flow is higher than its net income, indicating strong cash generation.

Historical accruals of AutoZone (AZO)

For AutoZone (AZO) in 2023, the Operating Cash Flow was $2,940,788,000 which is higher than the Net Income of $2,528,426,000. This signifies that the company is generating more cash from its operations than its accounting earnings, suggesting robust cash flow management. Charting the last 20 years, it is clear that AutoZone has consistently managed to either match or exceed its net income with its operating cash flow, especially prominent in recent years. Such a trend is very positive, reflecting a solid earnings quality and reliable liquidity. Therefore, AutoZone scores 1 point on this criterion.

Liquidity of AutoZone (AZO)

Leverage is declining?

This criterion assesses the change in leverage by comparing the leverage ratio from one year to the previous year. Lower leverage is preferable as it indicates reduced financial risk.

Historical leverage of AutoZone (AZO)

In 2022, AutoZone (AZO) had a leverage ratio of 0.5866, which increased to 0.6622 in 2023. This signifies a rise in leverage, pointing to an increase in debt levels relative to equity. Over the last 20 years, AutoZone has shown fluctuating leverage with a general upward trend. An increase in leverage indicates higher financial risk. Therefore, for this criterion, AutoZone scores 0 points since the leverage did not decrease.

Current Ratio is growing?

The Current Ratio is a liquidity measure calculated as current assets divided by current liabilities, indicating the ability to cover short-term obligations.

Historical Current Ratio of AutoZone (AZO)

AutoZone's Current Ratio increased from 0.7717 in 2022 to 0.7965 in 2023, thus scoring 1 point in Piotroski Analysis. Though an improvement, it is still below the industry's median ratio of 1.55, reflecting challenging short-term liquidity conditions compared to peers. Consistently below the industry median since 2003, AutoZone should focus on boosting short-term asset liquidity to mitigate risk.

Number of shares not diluted?

Shares Outstanding reflects the number of shares that are currently held by all shareholders, including share blocks held by institutional investors. A decrease in outstanding shares often suggests share buybacks, which can be beneficial for existing shareholders as they result in a higher ownership percentage.

Historical outstanding shares of AutoZone (AZO)

In 2023, AutoZone (AZO) reported 18,510,000 outstanding shares compared to 20,107,000 in 2022, indicating a reduction of approximately 7.95%. This decline suggests a share buyback initiative, leading to a +1 point in the Piotroski score. Over the past 20 years, it's evident that AZO has consistently reduced its shares outstanding from around 96,963,000 in 2003 to the current 18,510,000. This long-term trend of buybacks indicates a shareholder-friendly policy, positioning the company well in terms of market perception and investor confidence.

Operating of AutoZone (AZO)

Cross Margin is growing?

In the Piotroski analysis, the change in Gross Margin measures a company's operational efficiency. An increasing Gross Margin indicates better efficiency, and it suggests that a company is effectively managing its cost of goods sold relative to its sales revenue.

Historical gross margin of AutoZone (AZO)

The Gross Margin for AutoZone (AZO) slightly decreased from 0.5213 in 2022 to 0.5196 in 2023. The drop, albeit minor, of approximately 0.3 percentage points, suggests a slight decline in operational efficiency. Comparing these recent figures to AutoZone's 20-year history, we observe periods of fluctuations, with the peak Gross Margin value reaching around 0.5365 in 2019. Despite this recent decrease, it's worth noting that AutoZone's Gross Margin remains significantly higher than the industry median, which was at 0.3785 in 2023. Therefore, while the criteria results in 0 points for 2023, AutoZone's long-term trend and relative performance within its industry suggest a consistently strong operational efficiency.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets to generate sales revenue. High asset turnover indicates efficient use of assets.

Historical asset turnover ratio of AutoZone (AZO)

For AutoZone (AZO), the Asset Turnover increased from 1.0911 in 2022 to 1.1169 in 2023. This upward trend is positive as it shows improved efficiency in using its assets to generate revenue. Moreover, reviewing the historical data, AutoZone's asset turnover ratio shows a slight upward trend in recent years, indicating a potential improvement in operational efficiency post-pandemic (2021: 1.011 to 2022: 1.0911 to 2023: 1.1169). For the Piotroski analysis, a rise in asset turnover adds 1 point.


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