Operating for more than six decades, Big 5 Sporting Goods Corporation (BGFV) is an established player in the sporting goods retail space. It has gained 128.5% over the past three years and 53% over the past five years. This can be attributed to its strong market presence—both online and offline—and impressive brand strength.
Because team sports were widely suspended amid the worst of the COVID-19 pandemic, the company’s revenue was affected slightly as the demand for related products fell. However, this was more than offset by strength in its other product categories. BGFV reported impressive total revenue growth in its last-reported quarter.
As people have recognized the importance of staying fit while spending most of the time at home, the demand for BGFV’s athletic apparel has increased. This led to the stock’s 95.8% gain over the past six months. So, we think it is wise to bet on the stock now because this trend is expected to continue in the coming months.
Here’s what we think could shape BGFV’s performance in the near term:
Increasing Demand for Sports Apparel
The demand for sports apparel has increased significantly over the past few months as people have become much more concerned about their health and fitness while spending most of their time locked in at home. According to ReportLinker, the global sports apparel market is expected to hit $247.40 billion by 2027, growing at a CAGR of 4.9%. BGFV is expected to gain from this industry tailwind because it offers a range of products that include athletic shoes, apparel and equipment.
The company’s net sales for its fiscal year 2020 fourth quarter, ended January 3, 2021, was $290.58 million, up 19% year-over-year. BGFV’s gross profit for the quarter also increased 32.9% year-over-year to $102.39 million. Its operating income increased 1,743.6% year-over-year to $28.02 million, while its net income increased 5,805.1% year-over-year to $21.02 million in the fourth quarter. The company’s EPS also increased 4,650% year-over-year to $0.95.
In terms of its forward non-GAAP P/E ratio, BGFV’s 9.67x is 50.2% lower than the industry average 19.40x. In terms of forward P/S ratio, the stock’s 0.35x is 73.1% lower than the industry average 1.30x. Also, the stock’s forward EV/Sales of 0.57x is lower than the industry average 1.67x.
Favorable Analyst Estimates
Analysts expect BGFV’s revenue to increase 19.5% for the quarter ended March 31, 2021 and 11.3% for the quarter ending June 30, 2021. Its EPS is also expected to grow 400% for the quarter ended March 31, 2021 and 1,166.7% for the quarter ending June 30, 2021.
The stock closed yesterday’s trading session at $16.68, and Wall Street analysts expect it to hit $19 in the near term, which indicates a potential upside of 13.9%.
POWR Ratings Show Promise
BGFV has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. BHFV has an A grade for Momentum also, which is justified given its 37.3% returns over the past three months and 26.4% gains over the past month.
It also has an A grade for Quality. This is consistent with its trailing-12-month levered cash flow margin of 11.7%, which is higher than the industry average 6.9%.
The stock has an A grade for Value, in sync with its lower-than-industry valuation ratios. It has an A grade for Growth also, consistent with analysts’ expectations that its revenue and EPS will increase.
Beyond what we’ve stated above we have also given BGFV grades for Stability and Sentiment. Get all BGFV ratings here.
Of 33 stocks in the A-rated Athletics & Recreation industry, BGFV is ranked #1.
There are 20 other top-rated stocks in the same industry with an Overall POWR Rating of A or B. One can access them here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
BGFV is favorably positioned to gain from the growing demand for sport apparel. Regarding its past performance, its EPS has grown at a CAGR of 272.3% over the past three years. So, we think it’s wise to bet on the stock now because it is expected to generate big returns in the coming months.
BGFV shares were trading at $16.62 per share on Thursday morning, down $0.06 (-0.36%). Year-to-date, BGFV has gained 64.44%, versus a 9.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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