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Can Big 5 Sporting (BGFV) Be a Great Stock for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Big 5 Sporting Goods Corporation (BGFV - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
P/S Ratio
A key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Big 5 Sporting Goods Corporation has a P/S ratio of about 0.32. This is far lower than the S&P 500 average, which comes in at 3.10 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, BGFV is in the higher end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Big 5 Sporting Goods Corporation ’s P/CF ratio of 8.9, substantially lower than the Zacks classified Retail - Miscellaneousindustry average of 23.2, which indicates that the stock is undervalued from this aspect as well.
Broad Value Outlook
In aggregate, Big 5 Sporting Goods Corporation currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Big 5 Sporting Goods Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Big 5 Sporting Goods Corporation is just 1.13, little lower than the industry average of 1.21. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, BGFV is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Big 5 Sporting Goods Corporation might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company’s both of the Growth score and the Momentum score are ‘A’. This gives BGFV a Zacks VGM score—or its overarching fundamental grade—of ‘A’ as well. (You can read more about the Zacks Style Scores here >>)
The company has also seen favorable earnings estimates revisions in the recent days. Both the current quarter and the current year estimates have seen three estimates going higher for each in the past sixty days compared to none moving lower.
As a result, the current quarter consensus estimate has risen by 180% in the past two months and the full year estimate has increased by 17%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Big 5 Sporting Goods Corporation Price and Consensus
This bullish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Big 5 Sporting Goods Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 8% of more than 250 industries) that somewhat reduces its growth potential. In fact, over the past two years, the Zacks Retail - Miscellaneousindustry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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Can Big 5 Sporting (BGFV) Be a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Big 5 Sporting Goods Corporation (BGFV - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
P/S Ratio
A key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Big 5 Sporting Goods Corporation has a P/S ratio of about 0.32. This is far lower than the S&P 500 average, which comes in at 3.10 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, BGFV is in the higher end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Big 5 Sporting Goods Corporation ’s P/CF ratio of 8.9, substantially lower than the Zacks classified Retail - Miscellaneousindustry average of 23.2, which indicates that the stock is undervalued from this aspect as well.
Broad Value Outlook
In aggregate, Big 5 Sporting Goods Corporation currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Big 5 Sporting Goods Corporation a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Big 5 Sporting Goods Corporation is just 1.13, little lower than the industry average of 1.21. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, BGFV is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Big 5 Sporting Goods Corporation might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company’s both of the Growth score and the Momentum score are ‘A’. This gives BGFV a Zacks VGM score—or its overarching fundamental grade—of ‘A’ as well. (You can read more about the Zacks Style Scores here >>)
The company has also seen favorable earnings estimates revisions in the recent days. Both the current quarter and the current year estimates have seen three estimates going higher for each in the past sixty days compared to none moving lower.
As a result, the current quarter consensus estimate has risen by 180% in the past two months and the full year estimate has increased by 17%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Big 5 Sporting Goods Corporation Price and Consensus
Big 5 Sporting Goods Corporation Price and Consensus | Big 5 Sporting Goods Corporation Quote
This bullish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Big 5 Sporting Goods Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its strong Zacks Rank also indicates robust growth potential in the near future. However, the company’s prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 8% of more than 250 industries) that somewhat reduces its growth potential. In fact, over the past two years, the Zacks Retail - Miscellaneousindustry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for the broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>