The Buckle, Inc. (NYSE:BKE)

CAPS Rating: 4 out of 5

The Company is a retailer of medium to better-priced casual apparel, footwear and accessories for fashion conscious young men and women.


Player Avatar JohnCLeven (75.29) Submitted: 1/22/2013 9:56:07 AM : Outperform Start Price: $43.11 BKE Score: -20.48

Extraordinary returns on capital. ROC was 42% in most recent year (off the charts) and ROC has consistently grown just about every year from 12% a decade ago to 42% today. 5 yr avg ROC is 34-35%.

EPS has grown every single year for the past 10 years. Very few companies have been able to grow this consistently. FCF/EV = 9%. Also, a 1.77% dividend. Great management as well.

Looking at BKE's past growth history, I find it very unlikely that BKE will not continue to grow. Even if that future growth is at lower end of estimates and historical averages, I believe BKE should pan out to a solid long term investment.

And a BIG shout out to fool elcid16, who pointed out a glaring error that I made in my original BKE pitch, where I erroneously combined FCF yield and dividend yield. Thank you for correcting me. I am here to learn, and I appreciate the feedback.

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Member Avatar elcid24 (77.54) Submitted: 1/22/2013 5:26:05 PM
Recs: 2

As much as I've learned from your pitches, the least I could do is return a small favor. I know you're an EV guy, and you probably found BKE, initially, using a screen. The dividend they paid in December basically wiped out excess cash. Not sure if you counted for that in your FCF/EV calc. I'm guessing it might be closer to 7.5% or so after they report 2012 #s (they might not get that $12MM cash flow boost from working capital changes they saw in 2011). Still probably a good pick up at these levels...

Member Avatar JohnCLeven (75.29) Submitted: 1/22/2013 9:47:40 PM
Recs: 1

Thank you for the favor!

You are right about the screen, and right in assuming that I did not acct for that. I'm glad you still think BKE is a good pick up. I'm still learning about BKE, and am not nearly familiar enough with BKE to consider them for a real life investment. Hopefully, they will make for a decent caps pick.

In general, I think that the "retail is dead" consensus, has left some consistently successful retail operations like BKE, and larger retailers ROST, and KSS oversold. These companies are not going the way of BBY or radioshack.

I appreciate your comments.

Member Avatar paul1942 (< 20) Submitted: 3/25/2013 11:41:55 AM
Recs: 0

John, it seems that you have not followed BKE very long. I have been with buckle for years as a stock holder and never have been disappointed with their growth, management, no debt, and their dividends. I don't know how you can find a negative to this stock?It certainly meets all the criteria and fudamentals when i pick stocks.Maybe you should invest in gap or some other clothing retailers?

Member Avatar JohnCLeven (75.29) Submitted: 3/25/2013 5:19:53 PM
Recs: 2

Paul, i'm glad to hear your experience with BKE has been good.

Though, I've not followed BKE for long (actually I've never followed ANY company for more than 2 years! Two years ago, I was a 21 year old kid, who didn't even know what a dividend was.) But I've studied pretty diligently over the past two years, and BKE seems very attractive based on the fundamentals over the past decade.

Also, you pitch seems to suggest that I have negative feelings towards BKE, which is certainly not the case. I like BKE, that's why it has the green thumb.

That said, I've never been in one, and have no experience with their products, just their financial info via Morningstar, Value Line, and the articles I've read.

Hence, BKE is only a CAPs pick for me, and not a real life investment at this time.

Member Avatar JohnCLeven (75.29) Submitted: 7/23/2013 3:52:25 PM
Recs: 0

I forgot to mention that the chairman owns about 33% of the shares outstanding. Insider ownership is a good thing.

Member Avatar JohnCLeven (75.29) Submitted: 11/24/2014 10:07:53 AM
Recs: 0

Similar to COH, here is a retailer with ROIC that is TOO good...unsuatainably good. If the ROIC goes from insane (45%) to merely awesome (22.5%) you'll see a nearly 50% drop in EPS.

This is a danger of going after high ROIC companies. If they go from incredible to merely above average, you can lose ALOT of money.

I've read a few studies on mean reversion in profitability that is making me rethink me entire investment strategy.

High ROIC's are more likely to fall than rise. The real ticket, per Buffett, is finding a business whose ROIC is destined to RISE.

That's a much, much harder thing to determine.

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