Player Avatar Seattleldg (55.41) Submitted: 1/7/2013 12:08:42 AM : Outperform Start Price: $42.45 BKE Score: -15.92

Buckle is an outstanding yet underappreciated business that has done very well through recession and should do even better as the economy recovers. Owner Earnings have grown 18% per year for last 10 years with no slowdown in earnings in 08/09. ROE and ROIC have averaged 38 for the last 5 years. This was accomplished with no long term debt on the balance sheet. The business employs a conservative growth strategy using FCF rather than debt to fund growth.

While growth is outstanding on its own, an even bigger reason to own BKE is the dividend. The widely published dividend yield of 1.8% may not seem that inspiring. However, the company routinely pays a special dividend in the 4th quarter. A total of $4.50 per share in was paid in dividends in 2012 which gives the stock and outstanding 11.8% yield. With these kind of shareholder friendly payouts, it probably comes as no surprise that there is heavy insider ownership with the Chairman owning 34% of company.

In the current market, you would expect a company like this to have a PE in the 18-22 range. However, BKE currently sports a PE of less than 14. Using a reverse DCF analysis, this suggests that market is expecting no growth from this company. Given its track record, this is clearly silly. At current prices BKE offers a huge margin of safety. Collect the 11.8% yield while you wait for the market to catch on!

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