Head to Head Analysis: Advance Auto Parts (AAP) and AutoZone (AZO)

Advance Auto Parts (NYSE: AAP) and AutoZone (NYSE:AZO) are both retail/wholesale companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, dividends, institutional ownership, analyst recommendations, risk, profitability and earnings.

Dividends

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Advance Auto Parts pays an annual dividend of $0.24 per share and has a dividend yield of 0.2%. AutoZone does not pay a dividend. Advance Auto Parts pays out 4.5% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares Advance Auto Parts and AutoZone’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Advance Auto Parts $9.37 billion 0.88 $475.50 million $5.37 20.84
AutoZone $10.89 billion 1.55 $1.28 billion $43.04 14.41

AutoZone has higher revenue and earnings than Advance Auto Parts. AutoZone is trading at a lower price-to-earnings ratio than Advance Auto Parts, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Advance Auto Parts and AutoZone’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Advance Auto Parts 5.07% 12.45% 4.71%
AutoZone 12.00% -88.86% 14.37%

Volatility & Risk

Advance Auto Parts has a beta of 1.04, suggesting that its share price is 4% more volatile than the S&P 500. Comparatively, AutoZone has a beta of 0.84, suggesting that its share price is 16% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and price targets for Advance Auto Parts and AutoZone, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Advance Auto Parts 3 8 11 0 2.36
AutoZone 1 9 10 0 2.45

Advance Auto Parts currently has a consensus target price of $110.66, indicating a potential downside of 1.12%. AutoZone has a consensus target price of $755.50, indicating a potential upside of 21.78%. Given AutoZone’s stronger consensus rating and higher possible upside, analysts plainly believe AutoZone is more favorable than Advance Auto Parts.

Institutional & Insider Ownership

95.9% of AutoZone shares are owned by institutional investors. 4.1% of Advance Auto Parts shares are owned by company insiders. Comparatively, 2.8% of AutoZone shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

AutoZone beats Advance Auto Parts on 10 of the 16 factors compared between the two stocks.

About Advance Auto Parts

Advance Auto Parts, Inc. provides automotive aftermarket parts in North America, serving do-it-for-me (Professional) and do-it-yourself (DIY), customers. The Company’s stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. It serves through various channels ranging from traditional brick and mortar store locations to self-serving e-commerce sites. As of December 31, 2016, it operated 5,062 total stores and 127 branches primarily under the trade names Advance Auto Parts, Autopart International, Carquest and Worldpac. As of December 31, 2016, its Advance Auto Parts operations consisted of three geographic divisions, which included the operations of the stores operating under the Advance Auto Parts, Carquest and Autopart International trade names.

About AutoZone

AutoZone, Inc. retails and distributes automotive replacement parts and accessories. It offers various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. The company's products include A/C compressors, batteries and accessories, bearings, belts and hoses, calipers, carburetors, chassis, clutches, CV axles, engines, fuel pumps, fuses, ignition and lighting products, mufflers, radiators, thermostats, starters and alternators, and water pumps. It also offers maintenance products, such as antifreeze and windshield washer fluids; brake drums, rotors, shoes, and pads; brake and power steering fluids, and oil and fuel additives; oil and transmission fluids; oil, air, fuel, and transmission filters; oxygen sensors; paints and accessories; refrigerants and accessories; shock absorbers and struts; spark plugs and wires; and windshield wipers, as well as air fresheners, cell phone accessories, drinks and snacks, floor mats and seat covers, interior and exterior accessories, mirrors, performance products, protectants and cleaners, sealants and adhesives, steering wheel covers, stereos and radios, tools, and wash and wax products. In addition, the company provides a sales program that offers commercial credit and delivery of parts and other products; and tire repair services. Further, it sells automotive diagnostic and repair software under the ALLDATA brand through alldata.com and alldatadiy.com; automotive hard parts, maintenance items, accessories, and non-automotive products through autozone.com; and accessories, performance, and replacement parts through autoanything.com. As of December 05, 2017, it operated 5,480 stores in the United States, including Puerto Rico; 529 stores in Mexico; 14 stores in Brazil; and 26 Interamerican Motor Corporation branches. AutoZone, Inc. was founded in 1979 and is based in Memphis, Tennessee.

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