DCF Studio

    AZO · NYQ · Consumer Cyclical

    AutoZone, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 12501.66

    Market price

    USD 2855.31

    Implied upside

    +337.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis line has no market capitalisation, which means it is not ordinary shares - typically a hybrid, preference line, note or unlisted stub. A discounted cashflow values a claim on the whole business, so applying it here attributes all of the group’s revenue to a security that has no such claim. Its value is its coupon and call schedule. Look up the ordinary line instead.
    AdjustedCapital expenditure runs at 5.4% of revenue against depreciation of 2.9%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    No usable EV/EBITDA (EBITDA is not positive), so the exit multiple falls back to 8x.

    Value Per Share

    Perpetuity growth
    USD 12501.66+337.8%
    Exit multiple
    USD 2205.29-22.8%
    Market price
    USD 2855.31

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 19.9bnUSD 21.0bnUSD 22.1bnUSD 23.2bnUSD 24.4bn+5.2%
    EBITUSD 4.0bnUSD 4.2bnUSD 4.4bnUSD 4.6bnUSD 4.9bn+5.2%
    NOPATUSD 3.2bnUSD 3.3bnUSD 3.5bnUSD 3.7bnUSD 3.9bn+5.2%
    Add depreciation & amortisationUSD 587.0mUSD 617.7mUSD 650.1mUSD 684.1mUSD 719.9m+5.2%
    Less capital expenditureUSD -1.1bnUSD -1.1bnUSD -1.2bnUSD -1.2bnUSD -1.3bn+5.2%
    Less increase in working capitalUSD -169.3mUSD -178.1mUSD -187.4mUSD -197.2mUSD -207.6m+5.2%
    Free cashflow to firmUSD 2.5bnUSD 2.6bnUSD 2.8bnUSD 2.9bnUSD 3.1bn+5.2%
    Discount factor0.98060.94310.90690.87220.8387-
    Present valueUSD 2.5bnUSD 2.5bnUSD 2.5bnUSD 2.5bnUSD 2.6bn+1.2%
    Present Value Of The ForecastUSD 12.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.558Reported 0.340, pulled toward 1.0 (Blume)
    Cost of equity8.07%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 0.000.0% of capital
    Total debtUSD 12.3bn100.0% of capital, book value as a proxy
    Tax rate20.3%Effective, capped at statutory
    WACC3.99%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 12501.66

    94% of EV

    Forecast FCFF, final year
    USD 3.1bn
    Capex at depreciation, working capital in reinvestment
    USD 3.9bn
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    USD -161.5m
    Capitalised
    USD 3.7bn
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    USD 256.4bn
    Terminal value, discounted
    USD 215.0bn
    Enterprise value
    USD 227.6bn
    Less net debt
    USD 12.0bn
    Equity value
    USD 215.6bn

    Exit at 8.0x EBITDA

    Value per shareUSD 2205.29

    75% of EV

    Terminal value, undiscounted
    USD 44.7bn
    Terminal value, discounted
    USD 37.5bn
    Enterprise value
    USD 50.0bn
    Less net debt
    USD 12.0bn
    Equity value
    USD 38.0bn

    Spread between methods: 140%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    1.99%42008.79————
    2.99%13171.1219754.2939890.86——
    3.99%7541.139397.2312501.6618754.3037879.78
    4.99%5144.185981.057154.008916.9211865.50
    5.99%3817.874281.154876.945671.796785.85

    Outlined: this model. Green text: above today's price of 2855.31. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year5.2%-20.5%-25.7pp
    EBIT margin19.9%5.6%-14.3pp
    Discount rate4.0%7.9%+3.9pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.