Big 5 Sporting Goods Corporation ( BGFV - Analyst Report ) recently delivered its third consecutive positive earnings surprise on the back of its largest same-store sales increase in over 10 years. Despite a relatively modest earnings beat, analysts revised their estimates significantly higher for both 2013 and 2014, sending the stock to a Zacks Rank #1 (Strong Buy).

The company also announced a 33% increase in its quarterly dividend. It now yields a solid 2.6%. And valuation looks reasonable too with shares trading below the industry median.

Company Description

Big 5 is a sporting goods retailer in the western United States with 414 stores in 12 states. It operates under the "Big 5 Sporting Goods" name. The company was founded in 1955 and is headquartered in El Segundo, California. It has a market cap of $334 million.

Strong Fourth Quarter Results

Big 5 delivered better than expected fourth quarter results on February 26. Earnings per share came in at 19 cents, beating the Zacks Consensus Estimate by a penny. It was the company's third straight positive earnings surprise.

Net sales increased 7.4% to $243.6 million, ahead of the Zacks Consensus Estimate of $242.0 million. This was driven by a 6.5% increase in same-store sales, which was its largest increase in over 10 years. Meanwhile, the gross profit margin expanded 100 basis points to 32.2% of net sales. On top of this, the company leveraged its selling and administrative expenses, which declined 210 basis points to 29.2% of net sales.

In the press release, the company also announced a 33% increase in its quarterly dividend to 10 cents per share. It now yields a solid 2.6%.

Estimates Surging Higher

Despite a relatively modest EPS beat, analysts revised their estimates significantly higher for both 2013 and 2014, sending the stock to a Zacks Rank #1 (Strong Buy). Over the last 30 days, the 2013 consensus has surged from $0.88 to $1.07. Meanwhile, the 2014 consensus has increased from $1.09 to $1.23.

Based on current consensus estimates, analysts project 47% EPS growth this year and 15% growth next year. The company currently anticipates opening approximately 15-20 new stores in 2013, including three relocations, and closing approximately three relocated stores.

Reasonable Valuation

Given Big 5's strong growth projections, you might expect a sky-high P/E multiple. But that's not the case. Shares trade a relatively modest 14x 12-month forward earnings, a discount to the industry multiple of 16x. And its price to book ratio of 2.0 is well below the 3.3 median for its peers.

The Bottom Line

With solid earnings momentum, strong growth potential, a 2.6% dividend yield and reasonable valuation, Big 5 Sporting Goods offers investors attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.