The share of Big 5 Sporting Goods (NAS: BGFV, 30-year financial stocks) is considered to be significantly overvalued according to the GuruFocus Value calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should trade. It is calculated based on the historical multiples at which the stock was traded, past business growth and analyst estimates of future business development. If a stock is well above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is well below the GF Value Line, its future return will likely be higher. At a current price of $ 26.09 per share and a market capitalization of $ 581.6 million, Big 5 Sporting Goods is considered to be significantly overvalued. The GF score for Big 5 Sporting Goods is shown in the table below.
With Big 5 Sporting Goods being significantly overvalued, the stock’s long-term return is likely to be much lower than future business growth, which averaged 0.9% over the past five years.
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It is always important to check a company’s financial strength before buying its stock. Investing in companies with low financial strength carries a higher risk of permanent loss. Looking at the liquidity-to-debt ratio and interest coverage is a great way to understand a company’s financial strength. Big 5 Sporting Goods has a cash-to-debt ratio of 0.34 and is therefore in the middle of the range for companies in the Retail Industry – Cyclical. The total financial strength of Big 5 Sporting Goods is 6 out of 10, which suggests that Big 5 Sporting Goods financial strength is fair. Here are the Big 5 Sporting Goods’ debts and money over the past several years:
Companies that have been consistently profitable over the long term offer less risk to investors who may want to buy stocks. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Big 5 Sporting Goods has been profitable 9 over the past 10 years. For the past twelve months, the company had sales of $ 1.1 billion and earnings of $ 3.74 per share. The operating margin is 10.11%, better than 80% of companies in the Retail – Cyclical industry. Overall, Big 5 Sporting Goods profitability ranks 6th out of 10, which suggests fair profitability. These are the Big 5 Sporting Goods revenue and net revenue over the past few years:
Growth is probably one of the most important factors in evaluating a company. GuruFocus research has shown that growth is closely related to the long-term performance of a company’s stock. When a company’s business is growing, the company usually creates value for its shareholders, especially when the growth is profitable. Likewise, the value of the company decreases when a company’s sales and earnings decrease. The Big 5 Sporting Goods average sales growth rate over 3 years is in the mid-range for companies in Retail – Cyclical. The Big 5 Sporting Goods average 3-year EBITDA growth rate is 38.4%, better than 86% of companies in the Retail – Cyclical Industry.
A company’s profitability can also be assessed by comparing its return on capital employed (ROIC) to its weighted average cost of capital (WACC). The return on investment (ROIC) measures how well a company generates cash flow in relation to the capital invested in its business. The weighted average cost of capital (WACC) is the average rate a company must pay to all of its securityholders to fund its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely to create value for its shareholders. For the past 12 months, the Big 5 Sporting Goods ROIC was 16.88 while the WACC was 14.33. The historical comparison between ROIC and WACC from Big 5 Sporting Goods is shown below:
In a nutshell, Big 5 Sporting Goods (NAS: BGFV, 30-Year Financials) is considered to be significantly overvalued. The company’s financial condition is fair and its profitability is fair. Its growth ranks better than 86% of companies in Retail – Cyclical. To find out more about Big 5 Sporting Goods stock, check out 30 year financials here.
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