Stock Analysis on Net
Stock Analysis on Net

AutoZone Inc. (NYSE:AZO)

This company has been moved to the archive! The financial data has not been updated since December 18, 2023.

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

AutoZone Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 10.04%
01 FCFF0 2,295,339
1 FCFF1 3,548,864 = 2,295,339 × (1 + 54.61%) 3,225,054
2 FCFF2 5,051,843 = 3,548,864 × (1 + 42.35%) 4,172,008
3 FCFF3 6,571,953 = 5,051,843 × (1 + 30.09%) 4,932,162
4 FCFF4 7,743,694 = 6,571,953 × (1 + 17.83%) 5,281,273
5 FCFF5 8,174,911 = 7,743,694 × (1 + 5.57%) 5,066,652
5 Terminal value (TV5) 192,988,670 = 8,174,911 × (1 + 5.57%) ÷ (10.04% – 5.57%) 119,610,660
Intrinsic value of AutoZone Inc. capital 142,287,809
Less: Long-term debt and finance lease liabilities (fair value) 7,549,518
Intrinsic value of AutoZone Inc. common stock 134,738,291
 
Intrinsic value of AutoZone Inc. common stock (per share) $7,619.47
Current share price $2,637.36

Based on: 10-K (reporting date: 2023-08-26).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

AutoZone Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 46,637,539 0.86 11.13%
Long-term debt and finance lease liabilities (fair value) 7,549,518 0.14 3.33% = 4.21% × (1 – 21.00%)

Based on: 10-K (reporting date: 2023-08-26).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 17,683,418 × $2,637.36
= $46,637,539,296.48

   Long-term debt and finance lease liabilities (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (20.20% + 21.10% + 21.10% + 21.80% + 20.80% + 27.90%) ÷ 6
= 21.00%

WACC = 10.04%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

AutoZone Inc., PRAT model

Microsoft Excel
Average Aug 26, 2023 Aug 27, 2022 Aug 28, 2021 Aug 29, 2020 Aug 31, 2019 Aug 25, 2018
Selected Financial Data (US$ in thousands)
Interest expense, less capitalized interest 318,426 197,686 200,754 206,854 192,200 180,163
Net income 2,528,426 2,429,604 2,170,314 1,732,972 1,617,221 1,337,536
 
Effective income tax rate (EITR)1 20.20% 21.10% 21.10% 21.80% 20.80% 27.90%
 
Interest expense, less capitalized interest, after tax2 254,104 155,974 158,395 161,760 152,222 129,898
Interest expense (after tax) and dividends 254,104 155,974 158,395 161,760 152,222 129,898
 
EBIT(1 – EITR)3 2,782,530 2,585,578 2,328,709 1,894,732 1,769,443 1,467,434
 
Current portion of finance lease liabilities 86,916 92,877 89,932 67,498 56,246 52,290
Long-term debt 7,668,549 6,122,092 5,269,820 5,513,371 5,206,344 5,005,930
Finance lease liabilities, less current portion 200,702 217,428 186,122 155,855 123,659 102,013
Stockholders’ deficit (4,349,894) (3,538,913) (1,797,536) (877,977) (1,713,851) (1,520,355)
Total capital 3,606,273 2,893,484 3,748,338 4,858,747 3,672,398 3,639,878
Financial Ratios
Retention rate (RR)4 0.91 0.94 0.93 0.91 0.91 0.91
Return on invested capital (ROIC)5 77.16% 89.36% 62.13% 39.00% 48.18% 40.32%
Averages
RR 0.92
ROIC 59.36%
 
FCFF growth rate (g)6 54.61%

Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).

1 See details »

2023 Calculations

2 Interest expense, less capitalized interest, after tax = Interest expense, less capitalized interest × (1 – EITR)
= 318,426 × (1 – 20.20%)
= 254,104

3 EBIT(1 – EITR) = Net income + Interest expense, less capitalized interest, after tax
= 2,528,426 + 254,104
= 2,782,530

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,782,530 – 254,104] ÷ 2,782,530
= 0.91

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,782,530 ÷ 3,606,273
= 77.16%

6 g = RR × ROIC
= 0.92 × 59.36%
= 54.61%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (54,187,057 × 10.04% – 2,295,339) ÷ (54,187,057 + 2,295,339)
= 5.57%

where:

Total capital, fair value0 = current fair value of AutoZone Inc. debt and equity (US$ in thousands)
FCFF0 = the last year AutoZone Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of AutoZone Inc. capital

FCFF growth rate (g) forecast

AutoZone Inc., H-model

Microsoft Excel
Year Value gt
1 g1 54.61%
2 g2 42.35%
3 g3 30.09%
4 g4 17.83%
5 and thereafter g5 5.57%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 54.61% + (5.57% – 54.61%) × (2 – 1) ÷ (5 – 1)
= 42.35%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 54.61% + (5.57% – 54.61%) × (3 – 1) ÷ (5 – 1)
= 30.09%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 54.61% + (5.57% – 54.61%) × (4 – 1) ÷ (5 – 1)
= 17.83%