AutoNation (NYSE: AN) and AutoZone (NYSE:AZO) are both mid-cap retail/wholesale companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, analyst recommendations, earnings, valuation, institutional ownership, dividends and profitabiliy.

Analyst Ratings

This is a summary of recent recommendations for AutoNation and AutoZone, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AutoNation 0 8 3 0 2.27
AutoZone 1 12 10 0 2.39

AutoNation currently has a consensus target price of $48.38, suggesting a potential upside of 14.44%. AutoZone has a consensus target price of $768.05, suggesting a potential upside of 51.70%. Given AutoZone’s stronger consensus rating and higher probable upside, analysts clearly believe AutoZone is more favorable than AutoNation.

Profitability

This table compares AutoNation and AutoZone’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AutoNation 2.00% 18.40% 4.24%
AutoZone 11.82% -70.52% 14.44%

Institutional and Insider Ownership

66.1% of AutoNation shares are held by institutional investors. Comparatively, 96.8% of AutoZone shares are held by institutional investors. 3.1% of AutoNation shares are held by insiders. Comparatively, 2.6% of AutoZone shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares AutoNation and AutoZone’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
AutoNation $21.63 billion 0.20 $958.10 million $4.24 9.97
AutoZone $10.77 billion 1.32 $2.39 billion $43.18 11.73

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

Risk and Volatility

AutoNation has a beta of 1.24, indicating that its share price is 24% more volatile than the S&P 500. Comparatively, AutoZone has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500.

Summary

AutoZone beats AutoNation on 10 of the 14 factors compared between the two stocks.

About AutoNation

AutoNation, Inc. (AutoNation) is an automotive retailer in the United States. The Company offers a range of automotive products and services, including new vehicles, used vehicles, parts and service, which includes automotive repair and maintenance services, as well as wholesale parts and collision businesses, and automotive finance and insurance products, including vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. It operates through three segments: Domestic, Import and Premium Luxury. Its Domestic segment consists of retail automotive franchises that sell new vehicles manufactured by General Motors, Ford and FCA US. The Import segment consists of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda and Nissan. The Premium Luxury segment consists of retail automotive franchises that sell new vehicles manufactured by Mercedes-Benz, BMW, Audi and Lexus.

About AutoZone

Autozone, Inc. is a retailer and distributor of automotive replacement parts and accessories in the United States. The Company operates through the Auto Parts Locations segment. The Auto Parts Locations segment is a retailer and distributor of automotive parts and accessories. As of August 27, 2016, the Company operated through 5,814 locations in the United States, Puerto Rico, Mexico and Brazil. The Company’s stores carry product lines 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 other operating segments include ALLDATA, which produces, sells and maintains diagnostic and repair information software used in the automotive repair industry; E-commerce, which includes direct sales to customers through www.autozone.com, and AutoAnything, which includes direct sales to customers through www.autoanything.com.

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