Best Buy (NYSE: BBY): A Bull Case Thesis

We came across a bullish thesis on Best Buy Co. on ValueInvestorsClub by jamal. You can read the full article here. Here is the brief summary.

Originally set up in 1966 as an audio specialty store known as Sound of Music, Best Buy offers a variety of technology and electronics products. It operates in North America – the USA, Canada and Mexico.

BBY is a unique success story in a tough and competitive industry environment. The company has a decent online platform but a much bigger bricks-and-mortar presence. While the Amazons of the world have grown leaps and bounds creating a strong foundation for themselves, BBY has, amazingly, built a strong reputation of its own by combining both online and offline business platforms.

BBY has a an extraordinary skillset of adapting to the changes in business cycles and macro conditions. The company offers a unique combination of purchase online and delivery with variety of options at the client specific discretion. Its service such as expert guidance (in-store, via phone or online) on setting up of an electronic device, heavy repair, wiring and installation of third party products have helped BBY erect a moat of its own.

Best Buy’s revenue in the second quarter jumped 3.9% versus the same quarter last year, thanks to the company’s shift towards online sales. Domestic online revenue shot up a whopping 240% to $4.8 billion in the second quarter, compared to $1.4 billion in the same period last year.

With EBIT/TEV of  8.3% BBY has an attractive valuation. The company has an 8-year return on assets of 7.2%, while its long-term  return on capital is 16.3%. Some other factors making BBY stock attractive are substantial cash flow and tight input costs, a great customer service, sustained operational momentum and extremely successful management in tough conditions.