Dicks Sporting Goods Inc (DKS), Big 5 Sporting Goods Corporation (BGFV): Should You Invest in a Sporting Goods Company?

A potentially big new revenue stream for Dick’s comes in the form of a new niche store the company is planning on opening. Under the name Field and Stream, these new stores will cater specifically to hunters, fishers, and other outdoorsmen. Dick’s is attempting to enter an arena where Cabelas Inc (NYSE:CAB) is king, it will be interesting to see how that plays out.

Cabelas Inc (NYSE:CAB) has the most room to run

Cabelas Inc (NYSE:CAB) is a company that the market currently values at $4.8 billion. Is this company’s stock, which has already risen over tenfold since 2009, still worth buying?

Well, the company’s balance sheet gets a mixed review. On one hand, working capital is a very healthy $3.42 billion. On the other hand, the company keeps piling on long-term debt. The company’s long-term debt load has nearly doubled since the end of 2011. I understand that it is aggressively expanding, but it could be too much too fast.

In the past couple of years, the company has done a splendid job of growing net income and sales. Net income and sales have grown at three-year compounded annual growth rates of 14.2% and 5.7%, respectively.

When the company reported first-quarter results this year, it blew away expectations. Same store sales were up 24% and net income increased 72.9% year over year. It’s unwise to read too much into the results of any one quarter, but it’s a sign Cabelas Inc (NYSE:CAB) isn’t showing any signs of slowing down.

Final thoughts

Big 5 has seen its shares experience a massive run up in the past year. Analysts have a median price target below where the stock currently trades and its biggest shareholder has been selling.

Dick’s seems like a solid option for investors seeking a stable, profitable company that will likely deliver decent returns.

Investors who enjoy owning companies that operate within a niche will find one such company in Cabela’s. The company’s growth in the past four years has been absolutely incredible. However, Cabela’s also presents sizable risk. The company has massive amounts of debt and must continue growing at eye-popping rates to justify the current valuation.

Ryan Palmer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Should You Invest in a Sporting Goods Company? originally appeared on Fool.com is written by Ryan Palmer.

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