AutoZone

Methodology

AutoZone's automotive aftermarket retail business benefits from an aging vehicle fleet and non-discretionary repair needs, providing stable earnings through economic cycles. The company's dominant market position and commercial business expansion create steady growth visibility. This fair value calculation works well for AutoZone given consistent execution and defensive characteristics, though the DIY retail segment faces long-term pressures from vehicles requiring less maintenance.

Methodology

AutoZone's PEG ratio typically ranges from 1.5-2.5, reflecting solid valuations for a defensive retailer with steady mid-to-high single-digit growth from new stores and commercial expansion. The company's massive share buyback program creates significant EPS growth beyond operational performance. Compare to other auto parts retailers and defensive retail to assess whether AutoZone's execution track record and capital allocation discipline justify premium positioning.

Methodology

AutoZone does not pay a dividend, instead deploying virtually all free cash flow into aggressive share buybacks that have reduced share count dramatically over decades. The PEGY mirrors the PEG, but investors should note that buybacks effectively function as tax-efficient capital returns. For AutoZone, the lack of dividend is a strategic choice to maximize EPS growth through share count reduction rather than a weakness in capital return philosophy.