Essay about Stock Market

1480 Words Sep 29th, 2014 6 Pages
AUTOZONE

Q#1. How has AutoZone’s stock price performed over the previous five years? What other financial measures can you cite that are consistent with the stock price performance?

AutoZone’s shareholders had enjoyed strong price appreciation since 1997, with an average annual return of 11.5%. Over the previous five years, AutoZone’s stock price has increased dramatically. On February 1. 2012 the stock price was $348 compared to the $125 on February 1. 2007. The strong price appreciation resulted from several occurrences; some of them are U.S. economy recession and share repurchase program. Auto-part business was somewhat counter-cyclical. Company’s growth and stock price were directly related to the economy and number of miles a
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Q#4. Assume that AutoZone is planning to stop its share repurchase program. What would be the best alternative use of those cash flows? Why?

If we assume that AutoZone is going to quit its share repurchase program, the best alternative to use the cash flows would be to expand its business, either by opening a new stores or by acquisition.
The first proposition considers opening a new stores in domestic and foreign markets. The expansion is necessary to override the competition and to keep its position of leading retailer of automotive replacement parts and accessories in the United States. Leading retailer position in the U.S. gives AutoZone more motivation to expand overseas. AutoZone already owns some stores outside the U.S., in Puerto Rico and Mexico. Those stores have been operating successfully, giving a company more reasons to continue with its overseas investments. Next AutoZone’s target is Brazilian market. Company’s plan is to expand there over the next several years. Overseas investments can be very profitable for AutoZone, but they also bear a lot of risk. All investments should be developed very carefully, with a high level of cautions and with expertise person for targeted markets in their management.
The second proposition is growth by acquisition. U.S. market became oversaturated with auto part stores in the last couple of years. Even though AutoZone’s management was not seeing any signs of oversaturation at that

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