Head to Head Review: AutoZone (NYSE:AZO) vs. CarMax (NYSE:KMX)

AutoZone (NYSE:AZO) and CarMax (NYSE:KMX) are both retail/wholesale companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, dividends, profitability, analyst recommendations, valuation, earnings and risk.

Institutional and Insider Ownership

92.7% of AutoZone shares are owned by institutional investors. 2.1% of AutoZone shares are owned by company insiders. Comparatively, 1.7% of CarMax shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations for AutoZone and CarMax, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AutoZone	0	2	18	3	3.04
CarMax	2	2	9	1	2.64

AutoZone presently has a consensus target price of $4,087.00, indicating a potential upside of 10.07%. CarMax has a consensus target price of $83.67, indicating a potential upside of 33.55%. Given CarMax’s higher probable upside, analysts plainly believe CarMax is more favorable than AutoZone.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
AutoZone	13.56%	-56.07%	14.02%
CarMax	2.09%	9.11%	2.08%

Risk and Volatility

AutoZone has a beta of 0.39, indicating that its stock price is 61% less volatile than the S&P 500. Comparatively, CarMax has a beta of 1.38, indicating that its stock price is 38% more volatile than the S&P 500.

Earnings and Valuation

This table compares AutoZone and CarMax”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AutoZone	$18.90 billion	3.30	$2.66 billion	$147.75	25.13
CarMax	$26.35 billion	0.36	$500.56 million	$3.62	17.31

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

Summary

AutoZone beats CarMax on 11 of the 15 factors compared between the two stocks.

About AutoZone

AutoZone, Inc. retails and distributes automotive replacement parts and accessories in the United States, Mexico, and Brazil. The company provides various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. It also offers A/C compressors, batteries and accessories, bearings, belts and hoses, calipers, chassis, clutches, CV axles, engines, fuel pumps, fuses, ignition and lighting products, mufflers, radiators, starters and alternators, thermostats, and water pumps, as well as tire repairs. In addition, the company provides maintenance products, such as antifreeze and windshield washer fluids; brake drums, rotors, shoes, and pads; brake and power steering fluids, and oil and fuel additives; oil and transmission fluids; oil, cabin, air, fuel, and transmission filters; oxygen sensors; paints and accessories; refrigerants and accessories; shock absorbers and struts; spark plugs and wires; and windshield wipers. Further, it offers air fresheners, cell phone accessories, drinks and snacks, floor mats and seat covers, interior and exterior accessories, mirrors, performance products, protectants and cleaners, sealants and adhesives, steering wheel covers, tools, vehicle entertainment systems, and wash and wax products, as well as towing services. Additionally, the company provides a sales program that offers commercial credit and delivery of parts and other products; sells automotive diagnostic and repair software under the ALLDATA brand through alldata.com and alldatadiy.com; and automotive hard parts, maintenance items, accessories, and non-automotive products through autozone.com. AutoZone, Inc. was founded in 1979 and is headquartered in Memphis, Tennessee.

About CarMax

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles and related products in the United States. It operates in two segments: CarMax Sales Operations and CarMax Auto Finance. The CarMax Sales Operations segment offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles; used vehicle auctions; extended protection plans to customers at the time of sale; and reconditioning and vehicle repair services. The CarMax Auto Finance segment provides financing alternatives for retail customers across a range of credit spectrum and arrangements with various financial institutions. The company was founded in 1993 and is based in Richmond, Virginia.