AutoZone, Inc.

Questions

1. How has AutoZone’s stock price performed over the previous five years?
Note: Other than calculated AutoZone share price an SP500 Index annual return, you can also insert
a chart of AutoZone share price and SP500 behavior since 29/12/2006 (data available in an Excel file)

2. Other financial measures, such as sales growth, net income growth, EPS, EPS growth and
ROIC [EBIAT/(Equity+Debt)], are consistent with the stock price performance?

3. How does a stock repurchase work? Why would a company use this tactic?

4. What impact does the stock repurchase have on the main financial measures?
Note: Estimate the impact on sales growth, net income growth, EPS, EPS growth and ROIC, if during
the period between 2007 and 2011 the company had reduced the debt instead of spending the cash
on the share repurchases

5. How much of AutoZone’s stock price performance should we attribute to the share
repurchase program?

6. Assume that AutoZone is planning to stop its share repurchase program. What would be the
best alternative use of those cash flows? How each alternative might influence the portfolio
manager’s decision about his position in AutoZone?

Notes:

1. Be aware there isn’t a “correct answer” to the case. You should make some assumptions
that should be clearly justified to improve your final mark.
2. Your case solution should be sent by e-mail (which should include a pdf or word file and an
excel file with the calculations used to solve the case) until the end of November 18.
(fmanagement.mim@gmail.com).
3. I am available to help you regarding any doubt you will have during your work.

Good work!