DICK’S Sporting Goods, Inc. (DKS) operates as a sporting goods retailer mainly in the eastern United States. It offers hard lines including sporting goods, fitness equipment, golf equipment, and other accessories. Academy Sports and Outdoors, Inc. (ASO) also operates as a retailer of sporting goods and outdoor recreational products in the United States.
With the rapid introduction of vaccinations and the subsequent relaxation of social distancing requirements, outdoor activities are gaining in importance. The US outdoor and sports industry has seen a significant increase in sales this year. According to The NPD Group, equipment sales in sports retail increased 23% in the first half of 2021 compared to the same period before the pandemic in 2019. This was mainly driven by a 17% increase in brick-and-mortar sales and an increase in e-commerce sales by 31%. The industry is expected to grow in the coming months with significant advances on the vaccine front. The sporting goods stocks DKS and ASO could generate significant sales in the short term.
ASO has gained 73.5% in the last six months, while DKS has gained 67.4% in this period. However, DKS’s increase of 132.7% since the beginning of the year compares with ASO’s return of 106.3%. In terms of performance over the past nine months, DKS is the clear winner, up 135.3% versus 112.3% for ASO.
But which stock is better to buy now? Let’s find out.
Earlier this month, DKS announced that it will expand its nationwide presence with the opening of its first Public Lands store in Pittsburgh, PA on September 24th. This store demonstrates a new outdoor-focused specialty concept that is intended to attract more customers and expand the company’s market reach significantly.
On August 16, Whataburger and ASO announced their collaboration to bring an exclusive line worthy of a Texas-sized summer party: the very first Outdoors x Whataburger co-branded apparel collection. Both companies should benefit from this iconic collaboration.
Recent financial results
DKS net sales increased 20.7% year over year to $ 3.27 billion for the second fiscal quarter ended July 31. Operating income was $ 663.55 million, an increase of 69.6% over the same period last year. Net income increased 79% year over year to $ 495.51 million. The company’s earnings per share rose 45.2% year over year to $ 4.53.
ASO’s net sales rose 11.5% year-over-year to an all-time high of $ 1.79 billion in the second fiscal quarter that ended July 31, and income improved 13.6% year-over-year to $ 190.51 million -Dollar. Adjusted earnings per share for the company improved 29.3% year over year to $ 2.34.
Expected financial performance
Analysts expect DKS sales to grow 22.2% this year, while the company’s earnings per share are set to increase 109%. Additionally, earnings per share are expected to grow 16.4% per year over the next five years.
The Street expects ASO’s revenue to grow 16.9% this quarter and 15% this year. The company’s earnings per share are expected to rise 15.4% in the current quarter and 61.1% in the current year. Additionally, ASO’s earnings per share are expected to grow 11% per year over the next five years.
DKS is more profitable with gross profit margin and EBITDA margin of 36.65% and 17.96%, respectively, compared to ASO’s 33.96% and 13.19%, respectively.
In addition, the ROE, ROA and ROTC of DKS at 50.82%, 14.40% and 19.86% are compared with the 40.01%, 9.64% and 12.74% of ASO, respectively.
Thus, DKS is more profitable here.
In terms of Forward EV / Sales, DKS is currently trading at 1.06x, 27.4% higher than ASO, which is currently trading at 0.77x. However, ASO’s EV / EBITDA ratio over the past 12 months of 6.09 is 2.8% higher than DKS’s at 5.92.
Both stocks have an overall rating of B, which corresponds to a buy rating in our proprietary POWR rating system. The POWR ratings are calculated taking 118 different factors into account, with each factor being optimally weighted.
Both stocks also have a momentum rating of A. This is warranted as the stocks are currently trading above their 50-day and 200-day moving averages.
DKS has grade A for quality, while ASO has grade B for quality. DKS’s net profit margin is 10.69%, 70% above the industry average of 6.29%. On the other hand, ASO’s rating is justified as the net profit margin of 8.22% is 30.8% above the industry average.
Of the 36 stocks in the A-rated athletics and leisure industry, ASO is in 7th place and DKS in 20th place.
In addition to the above, we have also ranked stocks based on stability, sentiment, value and growth. Click here to view the DKS ratings. You can also get all ASO ratings here.
The outdoor sports industry is returning to pre-pandemic levels, supported by a strong vaccination campaign and a backlog. Both DKS and ASO are fundamentally strong with stable financial values. Thus, both stocks could now be suitable investments. However, higher profitability and better growth prospects make DKS a better buy here.
Our research shows that investing in stocks with an overall rating of Strong Buy or Buy increases the chances of success. Check out all of the top rated stocks in the athletics and leisure industry here.
DKS stock traded at $ 129.18 per share on Tuesday afternoon, down $ 1.64 (-1.25%). Since the beginning of the year, DKS has gained 142.45%, compared to an increase of 17.47% in the reference index S&P 500 over the same period.
About the author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to a career as an investment analyst. After completing her master’s degree in economics, she gained knowledge of equity research and portfolio management at Finlatics. More…