Stocks to Buy: AutoZone (AZO)
AutoZone (AZO) may not be a name that you expect. But think about just how many cars are on the road and how many new and used cars get purchased every year. Then think about complex these machines are, and how many parts there are in each car.
Autos will always be with us, every machine eventually gets older, and every machine eventually needs parts. That’s why you want to go with a company that has 5,109 stores in the U.S. and Mexico. Yet besides all the parts it sells, it also offers tons of discretionary auto products like air fresheners, floor mats, performance products, and stuff you see at your local car wash.
It also offers commercial credit to help its retailers, and has an automotive diagnostic and repair software program. How nice of AZO to offer a product that helps you decide which of its other products to buy.
Of all the auto part companies, AZO stock has the best valuation and is still growing strong. While it does sit on $4 billion in debt, it’s cheap debt (3% interest), and has a $126 million cash backstop. Most of all, though, it has the kind of FCF that I so love, putting out between $900 million and $1 billion annually. AZO stock continues to power forward on 13.82% long-term projected growth, and trades at a FY14 P/E of just 17.