Kick Your Portfolio Into High Gear With This Overlooked Company

If you thought that earnings season was over, you were wrong. Plenty of companies are still reporting this week, and many of them are often overlooked by investors. One of these lesser-known investments is AutoZone (NYSE: AZO  ) , the auto-parts retailer whose catchphrase just refuses to leave your brain ("Get in the zone..."). After you see its fourth-quarter earnings, you may pay less attention to the jingle and be more interested in investing in the company.

How you doin'?
This morning AutoZone reported that earnings rose 7.4%, with a profit of $323.7 million. That's $8.46 a share, compared to the $7.18 a share the company earned the same time last year. Although this means that the company beat earnings per share expectations of $8.40, it did fall short on revenue. AutoZone saw revenue increase 4.6% to $2.76 billion, which was short of the expected $2.8 billion. So far this morning, though, the stock has seen a 3.64% increase.

Investors seemed to have caught on to the fact that AutoZone knows what it's doing. The company has been growing quickly over the last few years, and finished the quarter with 5,000 stores spread across 49 states, the District of Columbia, Puerto Rico, and Mexico. This widespread consumer base helped increase auto-parts sales 4.6% and domestic commercial sales 16%. But there are a few other things that the company is doing right.

Highway to profits
AutoZone has benefited from two trends recently. The first is consumer consciousness about spending money on new cars. Many people want to keep their old roadsters running for as long as possible in order to avoid buying a new car, and AutoZone has been well positioned to take advantage of that.

The second important trend is AutoZone's share buyback program, initiated in 1998. Since then, the company has bought $11.9 billion of its own stock. Obviously, this has turbocharged the company's earnings per share, with EPS growing 455% over the last decade. So far, the buybacks appear effective, as the stock price's steady climb closely correlates with the decreasing number of shares outstanding. Keep in mind, however, that buybacks have not been the only driver of stock price performance: Net income has also soared 112% over the past decade.

A race to the finish
As beneficial as those trends may be for the company, how does AutoZone stack up against its competitors?

Company

P/E

Quarterly Revenue Growth

Operating Margin

Dividend Yield

AutoZone 15.97 7% 19% 0%
Advance Auto Parts (NYSE: AAP  ) 12.44 (1%) 11% 0.40%
O'Reilly Automotive (Nasdaq: ORLY  ) 18.71 6% 16% 0%
Pep Boys (NYSE: PBY  ) 15.27 1% 2% 1.20%

Sources: Yahoo! Finance and Fool.com.

According to the numbers above, AutoZone is doing OK. The company has impressive revenue growth and operating margin, but a lack of dividend may put off income investors. While the company's financials may be strong, its P/E is average, so investors may want to hold off until its stock goes down a bit before buying in.

If you missed out on AutoZone because you didn't think it was a viable investment opportunity, you'd better believe that the big hedge fund managers and traders did the same. In fact, we've found plenty of "Stocks Wall Street's Too Rich to Notice." These are consumer goods companies that we interact with every day but may not realize can make great investments. The Fool has gathered some of our favorite such stocks in one special report, which you can get for free! Just click here.

Motley Fool contributor Mark Reeth owns none of the stocks mentioned above, but he does love his 2001 Toyota. Follow him @ChristmasReeth. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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