Dick's Sporting Goods, Inc. (Public, NYSE:DKS) stock has dropped 11% in the last month and shares are now just $3 above their 52-week low. TheStreet.com's James Altucher mentioned over the holiday break that Dick's Sporting Goods (DKS) was up as much as 1.7% but ending the week down 4%. Dick's, however, is one of the few retailers that is bucking current trends. Its last quarterly earning report was amazing, sending the stock well over $30. James is convinced that Dick's is being irrationally sold off with the retailers.
Dick's Sporting Goods is a full-line sporting goods retailer offering an assortment of brand-name sporting equipment, apparel and footwear. The company operates 340 Dick's Sporting Goods stores and 77 Golf Galaxy stores throughout the U.S..
So how about those 'amazing' Q3 2007 results?
Dick's Sporting Goods Inc (DKS) on Nov 20th, 2007 posted a 57% rise in quarterly profit and raised its full-year outlook.
"Improved margins, greater efficiencies, the strength of our golf business and strong cash flow continue to drive our earnings increases," Chief Executive Edward Stack said in a statement. For the latest third quarter, the company reported net income of $12.2 million, or 10 cents a share, compared with $7.8 million, or 7 cents a share, a year ago. Results for the latest quarter include operating results of Golf Galaxy.
Net sales rose 18 percent to $838.8 million due to the opening of new stores and the inclusion of Golf Galaxy, which was acquired by Dick's Sporting in February. Analysts were expecting earnings of 6 cents a share, before items, on revenue of $845.9 million, according to Reuters Estimates.
For 2007, the company projected earnings of $1.29 a share, up from its earlier view of $1.24 to $1.25 a share. It sees a 2 percent increase in comparable store sales at Dick's Sporting Goods stores. Yet despite the good news shares of DKS have tanked, just like everything else on Wall Street.
Fellow Masters, this is a buying opportunity. Dick's is a great stock to start of the New Year and I wouldn't be surprised to see shares inch up few % points in the coming weeks.
Minyanville.com ran an article a few days ago titled - Dicks Sporting Goods: A Forgotten Christmas Trade. Here's what they had to say:
Instead of looking for the best ‘value’ whose P/E looks great right up until the time the “E” gets halved, I’d rather hunt for a superior and niche franchise that may be sitting on support inside of an uptrend instead. Dicks Sporting Goods (DKS) has posted +43% earnings growth over the past 4 quarters, versus the sector’s decline of (9%). DKS surprised the Street with a big upside earnings’ surprise last quarter versus an average of a (13%) miss for the sector. DKS’ Return on Equity is 22% versus the sector’s 11%. Yet DKS shares trade in line with the sector on a valuation basis using either earnings or revenues.
Unfair to compare it to many in that group? Yes, and that’s the sort of mismatch I’d be looking for, especially if you can be patient and wait for pullbacks where above average fundamental stories actually fall below average in performance.
Since Labor Day, the pullback in DKS was actually larger than the sector’s, perhaps setting up an interesting mismatch of reward over risk, especially if you want to use stops below your own version of a support line.
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Most importantly DKS is expanding, with a total market cap of $3 billion versus over $30 billion for the sector. The firm is planning to open its first store in Houston and I will gladly stand in line. The only sporting goods store (remarkably, especially considering the sports culture down here) nearby could not try harder to lose my business.
Let's start 2008 with some good investments, Dicks' could be one of them.
Article written by Ted Gottsegen
Contributor at TheStockMasters.com
Disclaimer: The Author does not hold any positions or shares in the securities mentioned in this publication
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