Are AutoZone (AZO) Stock Investors Happy, or Did They Miss Out?

AutoZone (NYSE: AZO) might fly under the radar these days, as it's not at the forefront of the artificial intelligence, robotics, or cloud computing trends. But the business deserves some attention. It certainly possesses favorable qualities that shouldn't be overlooked.

Are investors in this retail stock happy? Or did they miss out on AutoZone's ascent?

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AutoZone is a long-term market outperformer

This stock has lagged the overall S&P 500 in the past one- and three-year periods, rising 3% and 39% (as of Dec. 10), respectively, during those times. The widely followed benchmark, on the other hand, has put up double-digit total returns in the last 12 months and 36 months.

After hitting a peak of $4,354.54 in September, it's been a downward spiral, as AutoZone stock is off 21% from its all-time high. The company reported financial results for its fiscal 2026 first quarter (ended Nov. 22) on Dec. 9, and the market clearly wasn't pleased with the update. Same-store sales were up 5.5% year over year and AutoZone opened 53 net new stores.

But the gross margin took a hit due to inflationary pressures related to inventory. And higher operating expenses to support growth projects resulted in operating income decreasing 6.8% compared to Q1 2025.

Over the last five years, though, AutoZone is running circles around the index. Shares have soared 201%, effectively tripling investor capital. The S&P 500 would have doubled a starting investment.

All signs point to AutoZone being an outstanding business

Zooming out even further, AutoZone's performance has been spectacular. For example, the stock has exploded more than 3,500% in the past two decades. This long-term gain demonstrates that this is a high-quality business.

AutoZone has exhibited steady growth. Between fiscal 2015 and fiscal 2025, revenue increased at a compound annual rate of 6.4%. In fact, there was not a single down year. By opening new stores and growing same-store sales, the top line is lifted. Management plans to "aggressively" open new locations this fiscal year, which signals there is still meaningful expansion opportunity.

The business sells aftermarket auto parts. Demand remains solid in both good and bad economic times, as consumers always need functioning vehicles. This reduces risk for owners of the stock.

Generating profits isn't a problem, as AutoZone reported $2.5 billion in net income and $1.8 billion in free cash flow in fiscal 2025. The leadership team has a phenomenal track record of buying back stock. Just in the past three years, the diluted outstanding share count was reduced by 13%.

Investors might be more interested in buying the stock now. It trades at a price-to-earnings ratio of 23.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.