We came across a bullish thesis on AutoZone, Inc. (AZO) on The Compounding Tortoise’s Substack. In this article, we will summarize the bulls’ thesis on AZO. AutoZone, Inc. (AZO)’s share was trading at $3,658.59 as of 11th June . AZO’s trailing and forward P/E were 24.79 and 21.64 respectively according to Yahoo Finance.
An engineer at a workbench surrounded by automotive parts, tools, and microchips.
AutoZone reported its Q3 2025 results today, showing a notable rebound in same-store sales growth across both its Commercial (DIFM) and DIY segments. Despite this top-line momentum, earnings came under pressure from increased discretionary SG&A expenses, rising CAPEX, and ongoing FX headwinds, leading to declines in EBIT and EPS.
The market reacted with a 4.5% drop in the stock, although shares remain up 14% year-to-date, mirroring peer O’Reilly Automotive’s performance. This time last year, both names were trading near bear market levels, and a contrarian, valuation-focused approach led to aggressive additions in both positions. That move paid off, with shares subsequently rallying 34–41%. However, as sentiment toward O’Reilly turned euphoric by late January, positions were trimmed near 30x FY24 NOPAT, a level considered stretched. Subsequent Q1 results confirmed that rising expenses could weigh on O’Reilly’s near- to mid-term growth in NOPAT per share.
In contrast, AutoZone—trading at just 18.7x FY25 NOPAT versus O’Reilly’s 27.0x—presents a more attractive relative opportunity, even with its heavier DIY exposure, which remains a modest structural headwind. Yet, the growth gap between the two has narrowed meaningfully, and AutoZone’s upcoming rollout of 19 new mega hubs is expected to further support comps well beyond FY26.
Additionally, with FX pressures expected to ease, AutoZone’s momentum has room to continue. The stock’s 5% outperformance versus O’Reilly since March may only be the beginning, as the setup now clearly favors AutoZone as the leading play in the automotive aftermarket sector.
Previously, we covered a bullish thesis on AutoZone (AZO) on Substack by Francesco Ferrari in April 2025 that framed the company as a low-volatility compounder with best-in-class financial discipline, including high ROIC, steady revenue growth, and robust margins. The stock price has appreciated by roughly 1.5% since then. The Compounding Tortoise’s thesis builds on this by contrasting AZO’s valuation and operating momentum with rival O’Reilly Automotive, suggesting that AutoZone now holds the edge amid softening FX headwinds, normalized expenses, and a strategic mega hub expansion. Despite recent earnings pressure, the setup points to AZO as the more attractive aftermarket auto play moving forward.
