AZO gets a fundamental rating of 5 out of 10. The analysis compared the fundamentals against 121 industry peers in the Specialty Retail industry. AZO has an excellent profitability rating, but there are some minor concerns on its financial health. While showing a medium growth rate, AZO is valued expensive at the moment.

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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.
AZO had positive earnings in each of the past 5 years.
Each year in the past 5 years AZO had a positive operating cash flow.

1.2 Ratios

Looking at the Return On Assets, with a value of 12.53%, AZO belongs to the top of the industry, outperforming 87.60% of the companies in the same industry.
AZO has a Return On Invested Capital of 28.76%. This is amongst the best in the industry. AZO outperforms 95.87% of its industry peers.
The Average Return On Invested Capital over the past 3 years for AZO is significantly above the industry average of 12.28%.
The 3 year average ROIC (34.01%) for AZO is well above the current ROIC(28.76%). The reason for the recent decline needs to be investigated.

		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 94.21% of the companies in the same industry.
In the last couple of years the Profit Margin of AZO has remained more or less at the same level.
Looking at the Operating Margin, with a value of 18.42%, AZO belongs to the top of the industry, outperforming 95.04% of the companies in the same industry.
AZO's Operating Margin has been stable in the last couple of years.
With an excellent Gross Margin value of 52.15%, AZO belongs to the best of the industry, outperforming 80.17% 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.
Compared to 1 year ago, AZO has less shares outstanding
AZO has less shares outstanding than it did 5 years ago.
Compared to 1 year ago, AZO has an improved debt to assets ratio.

2.2 Solvency

An Altman-Z score of 2.86 indicates that AZO is not a great score, but indicates only limited risk for bankruptcy at the moment.
The Altman-Z score of AZO (2.86) is better than 61.98% 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.
The Debt to FCF ratio of AZO (4.65) is better than 66.94% of its industry peers.

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

ROIC/WACC3.02

WACC9.52%

2.3 Liquidity

A Current Ratio of 0.86 indicates that AZO may have some problems paying its short term obligations.
AZO has a worse Current ratio (0.86) than 80.99% of its industry peers.
A Quick Ratio of 0.13 indicates that AZO may have some problems paying its short term obligations.
AZO's Quick ratio of 0.13 is on the low side compared to the rest of the industry. AZO is outperformed by 94.21% of its industry peers.

		Industry Rank	Sector Rank
Current Ratio	0.86
Quick Ratio	0.13

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WACC

Debt/Equity

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3. Growth

3.1 Past

The earnings per share for AZO have decreased by -4.20% in the last year.
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.
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

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

The estimated forward EPS growth is still strong, although it is decreasing when compared to the stronger growth in 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

A Price/Earnings ratio of 25.83 indicates a quite expensive valuation of AZO.
Compared to the rest of the industry, the Price/Earnings ratio of AZO indicates a somewhat cheap valuation: AZO is cheaper than 65.29% of the companies listed in the same industry.
The average S&P500 Price/Earnings ratio is at 28.32. AZO is around the same levels.
Based on the Price/Forward Earnings ratio of 20.88, the valuation of AZO can be described as rather expensive.
Based on the Price/Forward Earnings ratio, AZO is valued a bit cheaper than the industry average as 60.33% of the companies are valued more expensively.
AZO's Price/Forward Earnings ratio indicates a similar valuation than the S&P500 average which is at 25.57.

		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.
AZO's Price/Free Cash Flow is on the same level as the industry average.

		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 an expensive valuation of the company.
The excellent profitability rating of AZO may justify a higher PE ratio.