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Big 5 Sporting (BGFV) Stock Up After Earnings: Time To Buy?

BGFV DKS ULTA HIBB

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Sporting goods retailer, Big 5 Sporting Goods Corp. (BGFV - Free Report) seems to be a lucrative investment option at the moment as its stock price continues to surge following the splendid third-quarter 2016 results, alongside the company’s impressive growth strategies and financial strength. Notably, the company’s shares have surged about 9.3% since the earnings release on Nov 1 and a whopping 75.7% year to date. Moreover, the company's share price is hovering close to its recently achieved 52-week high mark of $17.75.

What’s Working Well for the Stock?

Big 5 Sporting posted a strong third quarter as both the top and the bottom line topped estimates. Further, comps remained strong delivering 6.8% growth. Results primarily benefitted from significant competitive rationalization in the markets where the company operates owing to the recent liquidation of rivals Sports Authority and Sport Chalet.

BIG 5 SPORTING Price and Consensus

 

BIG 5 SPORTING Price and Consensus | BIG 5 SPORTING Quote

Going forward, the company expects comps and earnings to continue gaining from the closing of several rival stores in its markets that has led customers to acknowledge the ease of shopping at Big 5 Sporting given its wide range of product assortments and value. This was well evident from the company’s strong start to the fourth quarter with comps up in the high single-digit range. That said, the company is confident of delivering reasonably good fourth-quarter results, even amid an uncertain consumer spending environment in its markets during the upcoming holiday selling and winter seasons.

Consequently, estimates have been trending upward following of the company’s third-quarter earnings release. Over the past 7 days, the Zacks Consensus Estimate for the fourth quarter increased 52.6% to 29 cents, while the estimate for 2016 was up 26.3% to 72 cents.

Further, the company’s financial strength was highlighted by its second quarterly dividend hike announcement in 2016. In its third-quarter earnings release, the company raised quarterly cash dividend by 20%, which represented a 50% increase in dividend since the start of 2016. The raised dividend rate now stands at 15 cents compared to the previous rate of 12.5 cents. This clearly displays the company’s sound financial position and its ability to stay afloat in various economic and competitive cycles.

Among its growth strategies, Big 5 Sporting’s unique strategy of offering exclusive branded merchandise sourced from leading manufacturers provides it with a competitive edge over its rivals in a cut-throat specialty retailing industry. Further, the company leverages its strong vendor relationships to source overstock and closeout merchandise at substantial discounts. This helps it achieve the dual objective of boosting gross margin while offering compelling value to customers.

Additionally, the company leverages an extensive network of stores to effectively penetrate its target markets, directed toward generating healthy sales. Further, it remains focused on technological advancements to enhance services for its patrons. We believe that these moves poise it well for future growth.

From the above analysis, it is apparent that Big 5 Sporting deserves a place in your portfolio. Big 5 Sporting currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Other favorably ranked stocks in the same industry include Dick's Sporting Goods Inc. (DKS - Free Report) , Hibbett Sports Inc. (HIBB - Free Report) and ULTA Salon, Cosmetics & Fragrance Inc. (ULTA - Free Report) , each carrying a Zacks Rank #2 (Buy).

Dick's Sporting Goods, with a long-term earnings growth rate of 12.4%, has surged nearly 60.5% year to date.

Hibbett Sports has jumped 25.5% year to date. The stock has a long-term earnings growth rate of 11.1%.

ULTA Salon has gained nearly 23.3% year to date. Moreover, it has a long-term earnings growth rate of 19.5%.

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