AZO gets a fundamental rating of 5 out of 10. The analysis compared the fundamentals against 122 industry peers in the Specialty Retail industry. While AZO has a great profitability rating, there are some minor concerns on its financial health. AZO is quite expensive at the moment. It does show a decent growth rate.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

AZO had positive earnings in the past year.
AZO had a positive operating cash flow in the past year.
In the past 5 years AZO has always been profitable.
In the past 5 years AZO always reported a positive cash flow from operatings.

1.2 Ratios

With an excellent Return On Assets value of 12.53%, AZO belongs to the best of the industry, outperforming 87.70% of the companies in the same industry.
AZO has a better Return On Invested Capital (28.76%) than 95.90% of its industry peers.
AZO had an Average Return On Invested Capital over the past 3 years of 34.01%. This is significantly above the industry average of 12.19%.
The last Return On Invested Capital (28.76%) for AZO is well below the 3 year average (34.01%), which needs to be investigated, but indicates that AZO had better years and this may not be a problem.

		Industry Rank	Sector Rank
ROA	12.53%
ROE	N/A
ROIC	28.76%

ROA(3y)14.74%

ROA(5y)15.02%

ROE(3y)N/A

ROE(5y)N/A

ROIC(3y)34.01%

ROIC(5y)34.88%

1.3 Margins

Looking at the Profit Margin, with a value of 12.78%, AZO belongs to the top of the industry, outperforming 94.26% of the companies in the same industry.
AZO's Profit Margin has been stable in the last couple of years.
AZO has a Operating Margin of 18.42%. This is amongst the best in the industry. AZO outperforms 95.08% of its industry peers.
AZO's Operating Margin has been stable in the last couple of years.
Looking at the Gross Margin, with a value of 52.15%, AZO belongs to the top of the industry, outperforming 80.33% of the companies in the same industry.
AZO's Gross Margin has been stable in the last couple of years.

		Industry Rank	Sector Rank
OM	18.42%
PM (TTM)	12.78%
GM	52.15%

OM growth 3Y-1.79%

OM growth 5Y-0.76%

PM growth 3Y-4.08%

PM growth 5Y-0.78%

GM growth 3Y0.31%

GM growth 5Y-0.37%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so AZO is creating value.
Compared to 1 year ago, AZO has less shares outstanding
The number of shares outstanding for AZO has been reduced compared to 5 years ago.
Compared to 1 year ago, AZO has an improved debt to assets ratio.

2.2 Solvency

AZO has an Altman-Z score of 2.86. This is not the best score and indicates that AZO is in the grey zone with still only limited risk for bankruptcy at the moment.
AZO has a Altman-Z score of 2.86. This is in the better half of the industry: AZO outperforms 62.30% of its industry peers.
The Debt to FCF ratio of AZO is 4.65, which is a neutral value as it means it would take AZO, 4.65 years of fcf income to pay off all of its debts.
AZO's Debt to FCF ratio of 4.65 is fine compared to the rest of the industry. AZO outperforms 67.21% of its industry peers.

		Industry Rank	Sector Rank
Debt/Equity	N/A
Debt/FCF	4.65
Altman-Z	2.86

ROIC/WACC3.04

WACC9.46%

2.3 Liquidity

A Current Ratio of 0.86 indicates that AZO may have some problems paying its short term obligations.
Looking at the Current ratio, with a value of 0.86, AZO is doing worse than 81.15% of the companies in the same industry.
AZO has a Quick Ratio of 0.86. This is a bad value and indicates that AZO is not financially healthy enough and could expect problems in meeting its short term obligations.
Looking at the Quick ratio, with a value of 0.13, AZO is doing worse than 94.26% of the companies in the same industry.

		Industry Rank	Sector Rank
Current Ratio	0.86
Quick Ratio	0.13

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

AZO shows a slight negative growth in Earnings Per Share. In the last year, the EPS has decreased by -4.20%.
The Earnings Per Share has been growing by 15.01% on average over the past years. This is quite good.
The Revenue has been growing slightly by 3.81% in the past year.
The Revenue has been growing by 8.44% on average over the past years. This is quite good.

EPS 1Y (TTM)-4.2%

EPS 3Y7.22%

EPS 5Y15.01%

EPS Q2Q%-4.55%

Revenue 1Y (TTM)3.81%

Revenue growth 3Y5.23%

Revenue growth 5Y8.44%

Sales Q2Q%8.15%

3.2 Future

Based on estimates for the next years, AZO will show a quite strong growth in Earnings Per Share. The EPS will grow by 11.89% on average per year.
The Revenue is expected to grow by 7.30% on average over the next years.

EPS Next Y3.92%

EPS Next 2Y10.67%

EPS Next 3Y11.41%

EPS Next 5Y11.89%

Revenue Next Year8.46%

Revenue Next 2Y7.94%

Revenue Next 3Y7.87%

Revenue Next 5Y7.3%

3.3 Evolution

Although the future EPS growth is still strong, it is not able to hold up the even more excellent growth rate of the past years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.

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4. Valuation

4.1 Price/Earnings Ratio

With a Price/Earnings ratio of 25.83, AZO can be considered very expensive at the moment.
Based on the Price/Earnings ratio, AZO is valued a bit cheaper than 64.75% of the companies in the same industry.
AZO's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 28.32.
AZO is valuated rather expensively with a Price/Forward Earnings ratio of 20.88.
AZO's Price/Forward Earnings ratio is in line with the industry average.
Compared to an average S&P500 Price/Forward Earnings ratio of 25.57, AZO is valued at the same level.

		Industry Rank	Sector Rank
PE	25.83
Fwd PE	20.88

4.2 Price Multiples

The rest of the industry has a similar Enterprise Value to EBITDA ratio as AZO.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of AZO is on the same level as its industry peers.

		Industry Rank	Sector Rank
P/FCF	33.2
EV/EBITDA	16.73

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates AZO does not grow enough to justify the current Price/Earnings ratio.
AZO has an outstanding profitability rating, which may justify a higher PE ratio.