Is Autozone (NYSE:AZO) way too risky for millennials?

It seems Autozone will continue to recover much faster as its share price surged up 0.82% today. The firm current daily volatility is 1.82 percent, with a beta of 0.11 and an alpha of 0.06 over DOW. As many investors are getting excited about retail, it is fair to outline Autozone. We will evaluate why we are still optimistic in anticipation of a recovery.
Published over a year ago
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Reviewed by Rifka Kats

Autozone has roughly 1.71 B in cash with 2.96 B of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 74.93. Autozone has 8.52 B in debt. The entity has a current ratio of 1.04, demonstrating that it is in a questionable position to pay out its financial commitments when the payables are due.
Investing in AutoZone, just like investing in any other equity instrument, is characterized by a strong risk-return correlation. High risks mean high returns and low risk means lower expected returns. Risk management is the act of identifying and assessing the potential risk and developing strategies to minimize these risks and earn maximum possible profits while holding AutoZone along with other instruments in the same portfolio. Using conventional technical analysis and fundamental analysis to select individual securities into a portfolio complements risk management and adds value to overall investors' investing strategies.
Sophisticated investors, who have witnessed many market ups and downs, anticipate that the market will even out over time. This tendency of AutoZone's price to converge to an average value over time is called mean reversion. However, historically, high market prices usually discourage investors that believe in mean reversion to invest, while low prices are viewed as an opportunity to buy.
Please note, it is not enough to conduct a financial or market analysis of a single entity such as AutoZone. Your research has to be compared to or analyzed against AutoZone's peers to derive any actionable benefits. When done correctly, AutoZone's competitive analysis will give you plenty of quantitative and qualitative data to validate your investment decisions or develop an entirely new strategy toward taking a position in AutoZone.

How important is AutoZone's Liquidity

AutoZone financial leverage refers to using borrowed capital as a funding source to finance AutoZone ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. AutoZone financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to AutoZone's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of AutoZone's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between AutoZone's total debt and its cash.

AutoZone Gross Profit

AutoZone Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing AutoZone previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show AutoZone Gross Profit growth over the last 10 years. Please check AutoZone's gross profit and other fundamental indicators for more details.

AutoZone Correlation with Peers

Investors in AutoZone can reduce exposure to individual asset risk by holding a diversified portfolio of assets in addition to a long position in AutoZone. Diversification will allow for the same portfolio return with reduced risk. The correlation table of AutoZone and its peers is a two-dimensional matrix that shows the correlation coefficient between pairs of securities AutoZone is related in some way. The cells in the table are color-coded to highlight significantly positive and negative relationships. Each cell shows the correlation between one pair of equities and can be used to run pair trading strategies or create efficient portfolios with your current brokerage. Please check volatility of AutoZone for more details

Breaking down AutoZone Indicators

We consider Autozone very steady. Autozone secures Sharpe Ratio (or Efficiency) of 0.0125, which signifies that the company had 0.0125% of return per unit of risk over the last month. Our standpoint towards foreseeing the volatility of a stock is to use all available market data together with stock specific technical indicators that cannot be diversified away. We have found twenty-eight technical indicators for Autozone, which you can use to evaluate future volatility of the firm. Please confirm Autozone Mean Deviation of 1.25, risk adjusted performance of 0.0388, and Downside Deviation of 1.94 to double-check if the risk estimate we provide is consistent with the expected return of 0.0229%.
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Possible April correction of Autozone?

Latest Jensen Alpha is up to 0.06. Price may slide again. Autozone has relatively low volatility with skewness of -0.61 and kurtosis of 1.84. However, we advise all investors to independently investigate Autozone to ensure all accessible information is consistent with the expectations about its upside potential and future expected returns. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Autozone's stock risk against market volatility during both bullying and bearish trends. The higher level of volatility that comes with bear markets can directly impact Autozone's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Our Takeaway on Autozone Investment

When is the right time to buy or sell Autozone? Buying stocks such as Autozone isn't very hard. However, what challenging for most investors is doing it at the right time. Proper market timing is something most people cannot do without sophisticated tools, which help to isolate the right opportunities, deliver winning trades and diversify portfolios on a daily basis.
While some institutional investors may not share our view we believe that the current risk-reward utility is not appealing enough to do any trading. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Autozone.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Vlad Skutelnik do not own shares of AutoZone. Please refer to our Terms of Use for any information regarding our disclosure principles.

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