AutoZone Inc. (NYSE:AZO)

The financial data reveals several notable trends regarding the company's profitability, capital structure, and value creation over the six-year period.

Net operating profit after taxes (NOPAT)

NOPAT has exhibited an overall upward trend from 2018 to 2023, increasing from approximately 1.35 billion USD to a peak of about 3.18 billion in 2022. However, there is a noticeable decline in 2023, with NOPAT decreasing to roughly 2.80 billion USD. This suggests robust operational performance growth over the years, with a slight deterioration in the most recent period.

Cost of capital

The cost of capital percentage has gradually increased from 9.32% in 2018 to a high of 10.38% in 2022, followed by a marginal decrease to 10.19% in 2023. This upward movement implies that the company's capital has become more expensive over time, likely reflecting changes in market conditions or increases in perceived risk.

Invested capital

Invested capital rose steadily from approximately 5.28 billion USD in 2018 to a peak of 7.64 billion in 2020. This was followed by a decline in 2021 to about 6.60 billion USD and a further slight reduction in 2022. In 2023, invested capital increased again to nearly 6.99 billion USD. This indicates fluctuating levels of capital deployment, possibly linked to strategic investments, asset disposals, or efficiency improvements.

Economic profit

Economic profit, which measures value creation above the cost of capital, shows a consistent upward trajectory from 858.7 million USD in 2018 to a peak of approximately 2.51 billion in 2022. In 2023, economic profit declined to around 2.09 billion USD, mirroring the trend observed in NOPAT. Despite the recent drop, economic profit remains substantially higher than earlier years, indicating strong ongoing value generation.

Overall, the company demonstrated significant growth in operating profitability and economic value creation over the observed period. The increasing cost of capital posed upward pressure on performance benchmarks, yet economic profit continued to improve markedly until the latest year, which saw a moderation in both NOPAT and economic profit. The variations in invested capital suggest a dynamic approach to capital allocation, which may have influenced recent performance fluctuations.

Net Income Trend

Net income has exhibited consistent growth over the six-year period under review. Starting at approximately $1.34 billion in 2018, it increased to about $1.62 billion in 2019 and continued to rise steadily each year. The upward trajectory continued through 2020 and 2021, reaching around $2.17 billion. In 2022, net income rose further to nearly $2.43 billion and reached approximately $2.53 billion in 2023. This indicates robust profitability with a consistent positive trend, though the growth rate appears to moderate slightly in the last year.

Net Operating Profit After Taxes (NOPAT) Trend

NOPAT also demonstrated an overall upward trend but with some variation in growth momentum toward the end of the period. In 2018, it stood at about $1.35 billion, growing significantly to around $1.87 billion in 2019. It continued to increase, reaching $2.07 billion in 2020 and $2.39 billion in 2021. The peak was observed in 2022 with approximately $3.18 billion, marking the highest value in the dataset. However, in 2023, NOPAT decreased to about $2.80 billion, indicating a decline after several years of growth.

Comparative Insights

Both net income and NOPAT revealed general growth patterns from 2018 to 2022, reflecting improving operational efficiency and profitability. The divergence in 2023, where net income continued to increase but NOPAT declined, may suggest variations in operating performance metrics, tax impacts, or extraordinary items affecting operational profit. The decline in NOPAT, despite rising net income, could warrant further analysis of underlying factors to assess operational challenges or changes in cost structures.

Income Tax Expense

The income tax expense has shown a consistent upward trend over the six-year period. Starting at approximately 299 million US dollars in 2018, it increased steadily each year, reaching about 649 million in 2022. There was a slight decrease in 2023, with the expense falling marginally to around 639 million dollars. This general increase suggests rising taxable income or changes in tax rates or policies affecting the company.

Cash Operating Taxes

Cash operating taxes exhibited a more volatile pattern compared to income tax expense. Beginning at roughly 484 million dollars in 2018, there was a decline in 2019 to approximately 421 million. This was followed by a rebound in 2020 to nearly 495 million and a significant jump in 2021 to about 675 million dollars. The subsequent year, 2022, saw a reduction to around 527 million, but in 2023, cash operating taxes increased sharply to approximately 755 million dollars, the highest in the observed timeframe. These fluctuations may indicate changes in operational profitability, timing of tax payments, or adjustments in tax planning strategies.

Total Reported Debt & Leases

The total reported debt and leases exhibit a generally upward trend over the six-year period. Starting at approximately $7.0 billion in fiscal year 2018, the amount increased steadily year over year, reaching about $11.1 billion in fiscal year 2023. There is a noticeable acceleration in the increase from 2021 to 2023, suggesting enhanced leverage or increased reliance on debt and lease obligations.

Stockholders’ Deficit

The stockholders’ deficit shows a fluctuating but overall deepening negative position during the timeframe. Initially, the deficit increased from roughly -$1.52 billion in 2018 to nearly -$1.71 billion in 2019, then improved to around -$0.88 billion in 2020, indicating some recovery. However, from 2020 onwards, the deficit worsened significantly, reaching approximately -$4.35 billion by 2023. This trend reflects a substantial erosion of equity, which may signal challenges in profitability or asset valuation.

Invested Capital

Invested capital increased considerably from 2018 to 2020, rising from about $5.3 billion to $7.6 billion, indicating growing investment or capital expenditures during this period. However, in 2021 and 2022, invested capital declined to around $6.6 billion and $6.4 billion respectively, before slightly rebounding to about $7.0 billion in 2023. This pattern suggests a period of reduced capital investment or asset base contraction followed by a modest recovery.

Overall, the financial data indicates increasing leverage alongside a deteriorating equity position, with invested capital showing volatility. The rise in debt and leases coupled with a deepening stockholders’ deficit points to increasing financial risk, while fluctuations in invested capital reveal shifts in the company’s capital deployment strategy over the years.

Economic Profit

The economic profit exhibited an overall increasing trend from 2018 to 2023, with a rise from approximately 859 million US dollars in 2018 to a peak of about 2.51 billion US dollars in 2022. However, in 2023, there was a noticeable decline to roughly 2.09 billion US dollars, representing a contraction following the previous year's peak.

Invested Capital

Invested capital showed a generally upward trajectory over the analyzed period, increasing from around 5.28 billion US dollars in 2018 to approximately 7.99 billion US dollars in 2023. Notably, a substantial increase occurred in 2020 to nearly 7.64 billion US dollars, followed by a dip in 2021 and 2022 before rising again in 2023.

Economic Spread Ratio

The economic spread ratio fluctuated significantly throughout the years, beginning at 16.27% in 2018 and rising sharply to 22.96% in 2019. It then decreased to 17.44% in 2020 before climbing to a peak of 39.37% in 2022. In 2023, it declined to 29.95%, indicating volatility in the efficiency of return on invested capital relative to its cost.

Summary and Insights

Over the six-year period, both economic profit and invested capital increased notably, suggesting growth in operational performance and scale. The economic spread ratio's volatility indicates variations in profitability relative to the capital employed, peaking in 2022 when economic profit was also at its highest. The dip in economic profit and economic spread ratio in 2023 despite the increase in invested capital signals a reduction in profitability or efficiency in capital utilization during that year. Overall, the data reflects a pattern of growth with some recent challenges impacting profitability metrics.

Economic Profit

The economic profit showed a consistent upward trend from 2018 to 2022, increasing significantly from approximately 859 million US dollars in 2018 to over 2.5 billion US dollars in 2022. However, in 2023, there was a noticeable decline to about 2.1 billion US dollars, indicating a reduction from the peak achieved in the previous year.

Net Sales

Net sales exhibited steady growth each year, rising from roughly 11.2 billion US dollars in 2018 to about 17.5 billion US dollars in 2023. This continuous increase reflects ongoing expansion and revenue growth over the six-year period without any downturns.

Economic Profit Margin

The economic profit margin fluctuated over the years, starting at 7.65% in 2018, reaching a high point of 15.46% in 2022, and then decreasing to 11.99% in 2023. Despite the recent decline, the margin in 2023 remains notably higher than the initial levels observed in 2018 and 2019.