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AutoZone, Inc. (AZO) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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AutoZone, Inc. (AZO)

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Intrinsic Value (DCF)

Current$3,465.45
→
Intrinsic$2,010.73
-42%
$1,117.70$2,010.73$3,787.26
Market implies 26% growth for 5 years
Current price reflects execution expectations above 15% growth — not unreasonable for quality businesses.
At $3465, the market prices in continued strong cash flow growth (26%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $1118 → Bull $3787. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →11%13%15%17%
8%$2668$2961$3275$3611
10%$1607$1802$2011$2233
12%$1047$1191$1344$1507
14%$701$813$932$1059

Bull Case

  • Bull case ($3787) offers 9% upside at 18% growth, 8% discount

Bear Case

  • Bear case ($1118) implies 68% downside at 12% growth, 12% discount
  • Price reflects 26% growth expectations vs 15% historical — high bar to clear
  • Trading 42% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$2.06B
Year 2$2.37B
Year 3$2.72B
Year 4$3.13B
Year 5$3.61B
Terminal$57.13B

📐 Model Inputs

Growth Rate15.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.79BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is AZO stock undervalued or overvalued?
🔴 OVERVALUED

AZO trades at $3465.45 vs. our DCF-derived intrinsic value of $2010.73, implying -38% downside. Using a 9.5% WACC and 15.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($3320.72) suggests limited upside.

What is AZO's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.79B, projected at 15.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $12.02B net debt and dividing by 0.02B shares: Bear $1117.26 | Base $2010.73 | Bull $3320.72. Current price $3465.45 implies -38% to base case.

How is AZO's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 15.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($46.69B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.