Things are looking up for AutoZone (NYSE: AZO). The auto-parts retailer reported a 12% increase in third-quarter profits, and its EPS grew 28% from a year ago. In an attempt to return more value to its investors, the company recently authorized the repurchase of an additional $500 million worth of shares.

So let's see whether the stock might be worth adding to your portfolio.

Income matters
AutoZone's five-year compounded growth rate for revenue stood at 6%, whereas in the past 12 months, revenue grew by 10.2%, aided by a 5.3% increase in same-store sales and new store openings. In the last quarter alone, the company opened 43 stores in the U.S. and 12 in Mexico. AutoZone has had a positive response from Mexico and is thinking about expanding its operations there and may even expand to Brazil.

International expansion should add to the company's revenues, which analysts expect to grow by almost 15% annually over the next five years.

But sales aren't the end-all of recognizing a good investment. There's also return on invested capital, which tells us how well the company is using capital to generate returns. In this case, AutoZone outperforms its peers with an ROIC of 41.6%, compared with 26.8% at Advance Auto Parts (NYSE: AAP) 26.8% and 13.2% at O'Reilly Automotive (Nasdaq: ORLY).    

Stability
AutoZone's free cash flow over the past 12 months stands at a high $1.01 billion, which, relative to the company's market cap of $12.1 billion, is not too shabby. The company is also capable of churning out plenty of cash on a regular basis, and it's grown its free cash flow substantially over the past five years.

Value
The forward P/E of 13.4 makes AutoZone reasonably priced, with O'Reilly at 16.1 and Advance at 11.2. On an EV/EBITDA basis, however, AutoZone looks a little more expensive, with a 9.3 multiple. O'Reilly comes in at 9.9, but Advance sports just a 6.4 figure. But given what I see as AutoZone's core strengths and its nice potential for future growth, I'm fine with this. Sometimes it's worth paying up for quality.  

The Foolish bottom line
According to a recent A.T. Kearney report, U.S. car sales are likely to push 13.2 million this year and go up to almost 16 million by 2013. AutoZone should reap some of the benefits from those rising numbers, especially in the years immediately following. The stock is reasonably priced and should provide some good returns.

Fool contributor Shubh Datta doesn’t own any shares in the companies mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.