Shares of AutoZone (AZO 1.63%) sank 13% this week, according to data from S&P Global Market Intelligence. The auto parts retailer was a massive winner over the past five years, only to fall back to earth in recent quarters due to slowing same-store sales growth.
AutoZone's stock is now down 32% from its highs, bringing its valuation much closer to its long-term average. Does that mean you should buy the stock?
NYSE: AZO
Key Data Points
Slow sales and weather headwinds
As a mature business in the United States, AutoZone's revenue will be driven by per-store productivity, also known as same-store sales growth. Last quarter, same-store sales growth at its domestic locations was 4.1%, below Wall Street expectations. Gross margins also compressed, though that was due to a change in its accounting practices and had nothing to do with the underlying business.
The other piece of AutoZone's business is an expansion into Mexico and Brazil. These are the two largest economies in Latin America and have strong potential if AutoZone's brand can succeed in the regions. However, international same-store sales growth was just 1.6% last quarter, which also disappointed investors.
Image source: Getty Images.
Time to buy AutoZone stock?
After this fall, AutoZone's price-to-earnings ratio (P/E) has fallen back closer to its long-term average of 20. With 6,766 locations in the United States, it does not have a huge runway left to grow in the market, but it should see steady same-store sales growth in the years ahead.
Combined with the expansion internationally, and AutoZone stock may look appetizing after falling 32% from recent highs.
