Bed Bath & Beyond Inc. (NASDAQ:BBBY) has been a good stock for its shareholders, rising more than 35.2% and beating the S&P 500’s return of nearly 17.90%. Recently, the company has reported increasing revenue but lower profits in the first quarter of 2013. Famous investors Jim Simons, Chuck Royce and Scott Black have Bed Bath & Beyond Inc. (NASDAQ:BBBY) in their investment portfolios. Should investors come in the company at its current trading price? Let’s take a closer look.
Higher revenue but lower earnings
Bed Bath & Beyond Inc. (NASDAQ:BBBY) experienced a 17.8% increase in its sales in the first quarter, growing from $2.2 billion last year to $2.6 billion this year. The quarterly comparable store sales enjoyed growth of around 3.4%. Despite rising revenue, its net earnings came in at $202.5 million, a bit lower than the net earnings of $206.84 million in the first quarter of last year. The lower earnings in the first quarter of 2013 were due to a 24% jump to nearly $710 million. However, because of the share buybacks, its earnings per share actually grew from $0.89 per share to $0.93 per share. In the first quarter 2013, Bed Bath & Beyond Inc. (NASDAQ:BBBY) spent around $324 million to buy back around 5 million shares. The remaining balance for existing share buyback program was around $2.1 billion.
What I like about Bed Bath & Beyond Inc. (NASDAQ:BBBY) is its strong capital structure. As of June 2013, it had more than $4 billion in equity, $921.8 million in both cash and short-term investments, and no debt. The deferred rent and other liabilities came in at $493.7 million. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is trading at around $75.60 per share, with a total market cap of $16.5 billion. The market values the company at only 8.5 times its trailing EBITDA (earnings before interest, taxes, depreciation and amortization.)
Compared to peers such as Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT), Bed Bath & Beyond seems to be the most expensively-valued among the three.
Target Corporation (NYSE:TGT) is trading at $72.60 per share, with a total market cap of $46.60 billion. The market values Target Corporation (NYSE:TGT) at a lower valuation than Bed Bath & Beyond, at 7.7 times its trailing EBITDA. In the first quarter, both Target Corporation (NYSE:TGT)’s net income and revenue declined. While the revenue came in at $16.7 billion, the net income was only $498 million, or $0.77 per share, 28% lower than the net income of $697 million, or $1.04 per share in the first quarter last year. For the full year, it is expected to generate around $4.12 to $4.32 in EPS.