Big 5 Sporting Goods Corp (NASDAQ:BGFV)
The Company is a sporting goods retailer, which provides a full line of products that includes athletic shoes, apparel and accessories, and outdoor and athletic equipment for sports.
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CAPS downgrade to 1 star.
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The company looks to be de-leveraging quite a bit, which is paying off, however it's going to take a while. They only have a small amount of cash on hand and no investments and their growth rates aren't great. Cutting dividends may have been a smart move to fix the balance sheet, but it's not great for the shareholders. Cash flow from operations is gaining, but again, I think it's slow, stagnant growth.
Maybe once they shore up their balance sheet, have some investments, cut cost of revenue and overall improve their business it'll be worth looking at again, but I'll shop around the sector more first.
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Doing a discounted cash flow valuation, with growth varying over 2-4% over the next 10 years (which is just shy of past and expected store growth), along a higher discount rate (10-12%), I forecast anywhere from $18-30, with the company keeping dividends under 10% of free cash flow (however, I think dividend increases, if cash flow significantly improves, will be possible, but at least 3 or 4 years from now)
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So, after the quarterly earnings being so bad, why did they go up so much?
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The company has low overhead, quick turn around, & few stores that are always having incrediable sales. As a matter a fact, the store I visited last week, was hiring. like the Motley Fools always say's, " pick what you know ".
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The company has a solid platform and continues to grow every year
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Consumer discretionary stocks will fall when the economy slows down.
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TOO MUCH COMPETITION WITH BETTER OFFERINGS.
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Good prices and selection for the size of the stores. They seem to lease less expensive space and stock it well, closer to neighborhoods for quick runs or on the way to the game, mountains, camping without the long lines of the big box sporting goods retailers.
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Solid Managed Company. Did well over 06 Xmas I think. Target should be about 29-30 due to earnings hitting about $2 with a 15 PE in 2007. A keeper beyond one year as long as they keep current exec management.
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Big Things Expected from Big 5!!!
Big 5 Sporting Goods operates as a sporting goods retailer offering athletic shoes, apparel and accessories, as well as a selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, snowboarding, and in-line skating. The company operates 334 stores across 10 U.S states.
The $19 billion US athletic sport shoe market is the world’s largest and constitutes 47% of the global market. Footwear market is expected to increase 10.2% in value by 2008 and Athletic footwear comprises 35% of the total footwear purchases. This denotes a good picture for the company, which derives over 30% of its revenues from athletic and sport footwear. The third quarter performance of the company has been good with about 8% rise in the top-line and positive same-store sales across all their lines of business. Impressively, same-store sales, have been positive since past 43 consecutive quarters. On the expansion front, they have opened 10 stores in this fiscal and expect to increase its store base by roughly 6% annually, by opening 9 new stores in the next quarter. The company has maximum stores in California with further plans to explore opportunities there.
Additionally, the company earns the best returns on equity in the industry. Driven by the results, management expects over 7% rise in full year net earnings. Furthermore, management has been able to reduce its debt level despite store openings and dividend payouts. Also, company has achieved consistent revenue growth over the years. In future, company expects to enhance their operating efficiencies from the Californian distribution centre. In the light of all these facts, the stock price is expected to surge.
Recs
Proven model with plenty of expansion opportunities; LBO candidate
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