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AutoZone Inc  (NYSE:AZO) Asset Turnover: 0.38 (As of Aug. 2017)

Asset Turnover measures how quickly a company turns over its asset through sales. It is calculated as Revenue divided by Total Assets. AutoZone Inc's Revenue for the three months ended in Aug. 2017 was \$3,513 Mil. AutoZone Inc's Total Assets for the quarter that ended in Aug. 2017 was \$9,144 Mil. Therefore, AutoZone Inc's asset turnover for the quarter that ended in Aug. 2017 was 0.38.

Asset Turnover is linked to ROE % through Du Pont Formula. AutoZone Inc's annualized ROE % for the quarter that ended in Aug. 2017 was -110.46%. It is also linked to ROA % through Du Pont Formula. AutoZone Inc's annualized ROA % for the quarter that ended in Aug. 2017 was 18.98%.

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

AutoZone Inc Annual Data

 Aug08 Aug09 Aug10 Aug11 Aug12 Aug13 Aug14 Aug15 Aug16 Aug17 Asset Turnover 1.39 1.32 1.31 1.27 1.22

AutoZone Inc Quarterly Data

 Nov12 Feb13 May13 Aug13 Nov13 Feb14 May14 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 May17 Aug17 Asset Turnover 0.40 0.29 0.26 0.29 0.38

Calculation

Asset Turnover measures how quickly a company turns over its asset through sales.

AutoZone Inc's Asset Turnover for the fiscal year that ended in Aug. 2017 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (A: Aug. 2017 ) / ( (Total Assets (A: Aug. 2016 ) + Total Assets (A: Aug. 2017 )) / 2 ) = 10888.676 / ( (8599.787 + 9259.781) / 2 ) = 10888.676 / 8929.784 = 1.22

AutoZone Inc's Asset Turnover for the quarter that ended in Aug. 2017 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (Q: Aug. 2017 ) / ( (Total Assets (Q: May. 2017 ) + Total Assets (Q: Aug. 2017 )) / 2 ) = 3512.605 / ( (9028.264 + 9259.781) / 2 ) = 3512.605 / 9144.0225 = 0.38

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. Companies in the retail industry tend to have a very high turnover ratio.

Explanation

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula.

AutoZone Inc's annulized ROE % for the quarter that ended in Aug. 2017 is

 ROE % (Q: Aug. 2017 ) = Net Income / Total Equity = 1735.6 / -1571.2955 = (Net Income / Revenue) * (Revenue / Total Assets) * (Total Assets / Total Equity) = (1735.6 / 14050.42) * (14050.42 / 9144.0225) * (9144.0225/ -1571.2955) = Net Margin % * Asset Turnover * Leverage Ratio = 12.35 % * 1.5366 * -5.8194 = ROA % * Leverage Ratio = 18.98 % * -5.8194 = -110.46 %

Note: The Net Income data used here is four times the quarterly (Aug. 2017) net income data. The Revenue data used here is four times the quarterly (Aug. 2017) revenue data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

It is also linked to Return on Assets (ROA) through Du Pont Formula:

AutoZone Inc's annulized ROA % for the quarter that ended in Aug. 2017 is

 ROA % (Q: Aug. 2017 ) = Net Income / Total Assets = 1735.6 / 9144.0225 = (Net Income / Revenue) * (Revenue / Total Assets) = (1735.6 / 14050.42) * (14050.42 / 9144.0225) = Net Margin % * Asset Turnover = 12.35 % * 1.5366 = 18.98 %

Note: The Net Income data used here is four times the quarterly (Aug. 2017) net income data. The Revenue data used here is four times the quarterly (Aug. 2017) revenue data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Be Aware

In the article Joining The Dark Side: Pirates, Spies and Short Sellers, James Montier reported that In their US sample covering the period 1968-2003, Cooper et al find that firms with low asset growth outperformed firms with high asset growth by an astounding 20% p.a. equally weighted. Even when controlling for market, size and style, low asset growth firms outperformed high asset growth firms by 13% p.a. Therefore a company with fast asset growth may underperform.

Therefore, it is a good sign if a company's asset turnover is consistent or even increases. If a company's asset grows faster than sales, its asset turnover will decline, which can be a warning sign.

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