My Foolish colleague Ryan Fuhrmann laid out the bearish case pretty well. However, I have to take issue with a couple of things.

First, while I understand Ryan's concerns about the level of debt at AutoZone (NYSE:AZO), debt is not something to be looked at in isolation. The level of debt is important, but the company's ability to pay the interest is also important. So let's compare these across the industry players.


Interest Coverage Ratio




Advance Auto Parts (NYSE:AAP)






O'Reilly Automotive (NASDAQ:ORLY)



Pep Boys (NYSE:PBY)



Interest coverage defined as EBIT/interest.
Data from Capital IQ reflecting the last 12-month period.

While AutoZone's debt level may be the highest, it certainly doesn't have much trouble servicing its debt, as it generates more than nine times more earnings before interest and taxes than it pays in interest. That's pretty impressive performance, especially when you consider CSK's figures.

As for the lack of growth, that doesn't bother me at all, especially when very little growth is priced into the stock at the moment. If AutoZone can come through this difficult economic environment and increase sales via store openings and same-store sales increases, that will translate into higher margins and higher returns.

As Ryan said, the stock has had an impressive run. But I think it's just because the market has realized what it's missed. There could be many reasons why Joel Greenblatt sold his stake -- remember that he sometimes uses a mechanical method of buying and selling. It's not the bargain it once was, but AutoZone is worth holding today and may be worth buying if you think it can grow faster than 3% a year.

Wait! You're not done. Go back and read the other arguments, then vote for the winner of this week's Duel.

AutoZone is aMotley Fool Inside Valuerecommendation.

Retail editor andInside Valueteam member David Meier is ranked 284 out of 17,077 in CAPS and does not own shares in any of the companies mentioned. You can view his TMF profile here. The Fool takes its disclosure policy very seriously.