2 WallStreetBets Consumer Cyclical Stocks with Buy-Ratings

: ASO | Academy Sports & Outdoors Inc. News, Ratings, and Charts

ASO – The trajectory of United States’ economic recovery is just behind China’s, with the country deploying a combination of fiscal and monetary policies to overcome the pandemic-driven recession. With investors now focusing on “outdoor” cyclical stocks amid the economic recovery, Reddit forum wallstreetbets (WSB) expects Academy Sports and Outdoors (ASO) and Ethan Allen Interiors (ETH) to generate substantial returns soon. So please read on for a closer look at these two companies.

The U.S. economy has been recovering from the ravages of the COVID-19 pandemic at a faster-than-expected pace, supported by multiple fiscal stimulus packages and the Fed’s continued dovish monetary policy stance. According to the Bureau of Economic Analysis (BEA), the country’s real GDP increased at a 6.4% annual rate in the first quarter ended March 31.

According to CNBC/Moody’s Analytics Rapid Update of economists’ forecasts, median GDP growth expected for the second quarter is 9.3%.Consequently, investors have been rotating into cyclical stocks that are well positioned to thrive in an economic recovery. Given surging inflation and rising benchmark Treasury yields, popular Reddit community wallstreetbets has also been focusing on cyclical stocks.

Given this backdrop, we expect WSB  favorites Academy Sports and Outdoors, Inc. (ASO) and Ethan Allen Interiors Inc. (ETH) to deliver robust returns in the near term.

Academy Sports and Outdoors, Inc. (ASO)

ASO manufactures and sells outdoor recreational products and sporting goods across the country. The company has an established supply chain in the Southern states, through retail shops and distribution centers, as well as an e-commerce platform. ASO went public on October 2, 2020 through an initial public offering of 15.63 million shares priced at $13. Owned by the private equity  firm KKR & Co. Inc., ASO had a pre-market valuation of $1.10 billion.

According to WSB, the stock is “criminally undervalued.” The community believes the company has significant untapped potential. Driven by  rising interest from retail investors,  ASO’s shares have gained 156.4% since their  stock market debut, and 60.6% year-to-date.

ASO’s net revenues increased 16.6% year-over-year to a record $1.60 billion in its  fiscal fourth quarter, ended January 30. This can be attributed to a 16.1% rise in comparable sales, and 60.7% rise in e-commerce sales. Its gross profit came in at $499.10 million, up 34.7% from the same period last year. Its pro forma adjusted net income improved 485.8% from the prior year quarter to $103.10 million, while its pro forma EPS stood at $1.09, representing a 373.9% rise from its year-ago value.

ASO’s strategically timed market debut and multiple secondary offerings have allowed it to generate substantial capital for its operations amid the fast-paced economic recovery. The company raised approximately $400 million in January to refinance its debt at lower  rates, thereby augmenting its earnings potential. ASO had administered  two non-dilutive secondary offerings since its public debut, which improved the stock’s liquidity. Furthermore, the company bought back nearly 3.23 million shares from underwriters during its second secondary offering earlier this month. This is expected to increase ASO’s earnings per share in the coming quarters.

Analysts expect ASO’s EPS to rise 8.1% year-over-year to $3.48 next year, and at a 23.1% rate per annum over the next five years. The  company surpassed  consensus EPS estimates in the last two quarters. ASO’s revenue is expected to rise 3.3% from the same period last year to $5.88 billion in the current  year, and by 1.1% year-over-year to $5.94 billion next year.

It’s no surprise that ASO has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with the weighting of each optimized to improve overall performance.

The stock has an A grade  for Momentum, and B for Growth and Value. Of the 34 stocks in the A-rated Athletics & Recreation industry, ASO is ranked #12.

Beyond what we’ve stated above, one  can check out additional ASO Ratings for Sentiment, Stability and Quality here.

Ethan Allen Interiors Inc. (ETH)

ETH sells interior design products and home furnishings in North America, Asia, Europe and Middle East. The company’s operations can be categorized  in two segments: wholesale and retail. It also maintains an online presence through the ethanallen.com website. ETH has an ISS Governance QualityScore of 1 (as of April 30), indicating minimal governance risk. The housing market and ancillary industry boom earlier this year made ETH one of the most talked about stocks in the wallstreetbets chatroom. Shares of ETH have gained 172% over the past year, and 55.3% year-to-date.

To prepare for the anticipated rise in demand amid the economic recovery, ETH strengthened its retail position by relocating and opening new design centers across the country. Because  75% of ETH’s products are manufactured in North America, the company has opened six new and relocated design centers across the U.S. over the past 12 months. The company embraced technology-driven projections through its proprietary 3D Room Planner technology to offer an immersive experience to potential customers. The customer satisfaction focused technology is expected to significantly increase the company’s clientele and operations.

For the third quarter, ended March 31,  ETH’s net sales stood at $176.96 million, up 18.2% year-over-year. Its adjusted operating income improved 5,446.7% from the same period last year to $19.58 million. Its adjusted net income came in at $14.68 million, representing a 2,294.8% rise from the year-ago value. And its adjusted EPS increased 2800% from the prior year quarter to $0.58.

A $0.50 consensus EPS estimate for the current  quarter, ending June 30, indicates a 433.3% improvement year-over-year. ETH has an impressive earnings surprise history as well; it beat the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to rise 94.3% from the prior year quarter to $177.90 million in its fiscal year 2021 second quarter.

ETH’s POWR Ratings reflect this promising outlook. It has an overall B rating, which equates to Buy in our proprietary rating system. ETH has an A  grade for Momentum and Quality, and a B grade for Growth. It is ranked #22 of 64 stocks in the A-rated Home Improvement & Goods industry.

We have also graded ETH for Sentiment, Stability and Value. Get all ETH Ratings here.

ASO shares were trading at $33.50 per share on Tuesday morning, up $0.20 (+0.60%). Year-to-date, ASO has gained 61.60%, versus a 11.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
ASOGet RatingGet RatingGet Rating
Get RatingGet RatingGet Rating

Most Popular Stories on StockNews.com

Is It Time for Small Caps to Shine?

November was about as good of a month as a stock investor could ask for. However, still too much of the gains are accruing the same old collection of large cap stocks at the top of the S&P 500 (SPY). Gladly there are healthy signs that small caps are ready to take charge. Get Steve Reitmeister’s take on that subject including a preview of his top 11 picks for today’s market. Read on for more…

3 Big Reasons Why Microsoft May Not Be A Buy After All

Cheap puts and an expensive stock set up for a put play in Microsoft (MSFT).

This Stock is Feasting on Success During the Holidays

There are a lot of traditions that surround the holidays…tree decorating, giving gifts, holiday lights, festive menorahs. But one tradition stands out above the rest when it comes to getting together with family and friends and celebrating this time of year. And that is going to a holiday party and feasting on all of the holiday delights. If your holiday party finds you celebrating in a restaurant this year, you can probably thank Sysco Corp for delivering, and possibly having a hand in preparing, the food and drink you’re enjoying.

Top 3 Industrial Stocks Lighting Up the Market This Month

With legislative support, increased construction investments, and technological advancements, the industrial sector is witnessing rapid growth. Hence, it could be wise to invest in Siemens (SIEGY), Installed Building Products (IBP), and Konica Minolta (KNCAY), all of which are making significant market impacts this month. Keep reading…

Upside Potential for This Bull Market?

The S&P 500 (SPY) is flirting with new highs once again. Thus a good time to ponder the upside potential for stocks into year end and then what is likely on tap in 2024. That is exactly what investment veteran Steve Reitmeister shares in the commentary below including a preview of his 11 favorite picks for today’s market. Read on below for more...

Read More Stories

More Academy Sports & Outdoors Inc. (ASO) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All ASO News