Why AutoZone (AZO) Deserves a Second Look Beyond the Hype Cycle

The Underrated Stock That’s Been Quietly Crushing It

While tech stocks and AI innovations dominate headlines, AutoZone has been methodically compounding investor wealth in the background. Over the past five years, AZO shares have delivered returns that make the S&P 500 look pedestrian—up 201% versus the benchmark’s 100% gain. That means your $10,000 investment would have tripled instead of doubled.

This raises an interesting question: Is AutoZone truly out of favor right now, or are long-term investors simply tuning out the short-term noise?

A Business Built to Weather Any Economy

AutoZone operates in a segment that most investors overlook: the aftermarket auto parts retail space. But here’s why this matters—demand for vehicle maintenance and repairs doesn’t disappear in recessions or booms. People need their cars to work regardless of economic conditions, which creates a natural moat around the business.

The numbers reflect this resilience. Between fiscal 2015 and 2025, revenue grew at a compound annual rate of 6.4%—without a single down year. Management is now pursuing an “aggressive” expansion strategy, opening 53 net new stores in the most recent quarter alone, suggesting the runway for growth remains long.

Recent Turbulence Masks Underlying Strength

The stock recently pulled back 21% from its September peak of $4,354.54, largely due to disappointing Q1 fiscal 2026 results announced in early December. Same-store sales grew 5.5% year-over-year, but gross margins compressed due to inventory inflation, and operating income fell 6.8% compared to the prior year.

On a one-year basis, AZO trails the S&P 500 (up 3% versus double-digit returns for the index). Yet this short-term stumble tells almost nothing about the company’s fundamental trajectory.

The Financial Machine Keeps Humming

What separates exceptional businesses from average ones is their ability to convert growth into cash and return capital to shareholders. AutoZone achieved $2.5 billion in net income and $1.8 billion in free cash flow during fiscal 2025. The management team has demonstrated this commitment through aggressive buybacks, reducing the diluted share count by 13% over just three years.

The stock currently trades at a 23x price-to-earnings multiple—reasonable given the quality of earnings and the company’s history of capital allocation.

Looking Back to See Forward

Perhaps the most telling metric is the two-decade track record. AZO stock has appreciated more than 3,500% over the past 20 years—transforming a $10,000 investment into more than $350,000. This isn’t luck; it’s the result of disciplined execution in a business with structural advantages.

For investors on the sidelines, the recent pullback may present an entry point into a company that has proven itself through multiple market cycles. AutoZone may not capture the excitement of trending sectors, but it continues to deliver where it matters most—in returns.