Hibbett Sports, Inc. (HIBB)

Upthumb. Excellent price to cash flow. Zero debt. 10% 5 year growth rate. Higher margins than peers.

Description:

Local-oriented sporting goods retailing chain that has carved a niche market for itself in low-population counties (30,000-100,000 individuals) where its other national chain competitors don't enter. Hibbett stores are generally positioned in strip malls anchored by Wal-Marts, which, in the markets Hibbett enters, are the community's retail center.

Hibbett has a very intelligent expansion plan, whereby the company only enters markets that are within a 2-hour driving distance from an existing Hibbett Store, allowing the company to leverage pre-existing consumer awareness about its brand.

The Numbers:

The company's best quality is its ability to grow organically with no debt. Hibbett has gone from 52 stores in 1994 to over 700 stores in 2008. Net income has grown by 18% annually for the past 11 years and ROE has increased from 15% to 25% in the same period. Comparable store sales have only been negative once in over ten years, that was -3.1% in 2007, but has on average grown +3.5% annually for 11 years now.

Conclusion:

Hibbett is a simple company that has found a market niche which it is very good at exploiting. The company has great management that has produced industry-high return on equity, and the only thing stopping Hibbett from growing even further is the amount of land in the US. Currently Hibbett is in 23 or so states, meaning there is still more than 50% of the contiguous US to expand to.