We assign a fundamental rating of 5 out of 10 to AZO. AZO was compared to 122 industry peers in the Specialty Retail industry. While AZO belongs to the best of the industry regarding profitability, 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

In the past year AZO was profitable.
In the past year AZO had a positive cash flow from operations.
In the past 5 years AZO has always been profitable.
Each year in the past 5 years AZO had a positive operating cash flow.

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.
Measured over the past 3 years, the Average Return On Invested Capital for AZO is significantly above the industry average of 12.24%.
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

AZO's Profit Margin of 12.78% is amongst the best of the industry. AZO outperforms 94.26% of its industry peers.
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.
In the last couple of years the Operating Margin of AZO has remained more or less at the same level.
With an excellent Gross Margin value of 52.15%, AZO belongs to the best 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

With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), AZO is creating value.
The number of shares outstanding for AZO has been reduced compared to 1 year ago.
The number of shares outstanding for AZO has been reduced compared to 5 years ago.
AZO has a better debt/assets ratio than last year.

2.2 Solvency

AZO has an Altman-Z score of 2.90. 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.
With a decent Altman-Z score value of 2.90, AZO is doing good in the industry, outperforming 64.75% of the companies in the same industry.
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.
The Debt to FCF ratio of AZO (4.65) is better than 67.21% of its industry peers.

		Industry Rank	Sector Rank
Debt/Equity	N/A
Debt/FCF	4.65
Altman-Z	2.9

ROIC/WACC3.04

WACC9.46%

2.3 Liquidity

AZO has a Current 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 Current ratio, with a value of 0.86, AZO is doing worse than 81.15% of the companies in the same industry.
A Quick Ratio of 0.13 indicates that AZO may have some problems paying its short term obligations.
With a Quick ratio value of 0.13, AZO is not doing good in the industry: 94.26% of the companies in the same industry are doing better.

		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

The earnings per share for AZO have decreased by -4.20% in the last year.
AZO shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 15.01% yearly.
Looking at the last year, AZO shows a small growth in Revenue. The Revenue has grown by 3.81% in the last year.
Measured over the past years, AZO shows a quite strong growth in Revenue. The Revenue has been growing by 8.44% on average per year.

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

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

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.
The Revenue growth rate is stable: in the next years the growth will be about the same than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

With a Price/Earnings ratio of 26.50, AZO can be considered very expensive at the moment.
65.57% of the companies in the same industry are more expensive than AZO, based on the Price/Earnings ratio.
The average S&P500 Price/Earnings ratio is at 28.82. AZO is around the same levels.
The Price/Forward Earnings ratio is 21.41, which indicates a rather expensive current valuation of AZO.
AZO's Price/Forward Earnings ratio is in line with the industry average.
The average S&P500 Price/Forward Earnings ratio is at 25.95. AZO is around the same levels.

		Industry Rank	Sector Rank
PE	26.5
Fwd PE	21.41

4.2 Price Multiples

AZO's Enterprise Value to EBITDA ratio is in line with the industry average.
AZO's Price/Free Cash Flow is on the same level as the industry average.

		Industry Rank	Sector Rank
P/FCF	34.06
EV/EBITDA	17.11

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
AZO has an outstanding profitability rating, which may justify a higher PE ratio.