Dicks Sporting Goods Inc (DKS), Big 5 Sporting Goods Corporation (BGFV), Hibbett Sports, Inc. (HIBB): Did the Market Hand You a Post-Earnings Opportunity?

Then, as we look at P/E ratio, forward P/E ratio, and expected five year growth (PEG ratio), Dicks isn’t even close in presenting the level of value that we see in Big 5. In regards to price/sales, Dicks is more than twice as expensive, and more than 50% as expensive in comparison to operating cash flow.

Is There Other Competition? 

Aside from Big 5 and Dicks, the other most notable competitor is Hibbett Sports, Inc. (NASDAQ:HIBB), but they have not yet announced earnings. However, even a quick glance at Hibbett Sports, Inc. (NASDAQ:HIBB) further validates the bullish points for Big 5.

In particular, Hibbett Sports, Inc. (NASDAQ:HIBB) has reported revenue of $825 million over the last 12 months; Big 5 has created $981 million in the same period. Thus, Big 5 is larger, yet Hibbett Sports, Inc. (NASDAQ:HIBB)’s market cap is more than threefold larger.

The primary reason for this disconnect is margins, as Hibbett Sports, Inc. (NASDAQ:HIBB) has an industry best 14% operating margin. Yet, Hibbett’s margins declined during its last quarter (much like Dicks). As previously noted, Big 5 continues to explode with margin growth — Dicks and Hibbett Sports, Inc. (NASDAQ:HIBB)’s margins are declining — which, along with comparable sales growth, further supports its upside potential.

Final thoughts

After assessing both Dicks Sporting Goods Inc (NYSE:DKS) and Big 5 Sporting Goods Corporation (NASDAQ:BGFV)’s last quarter, I find it clear that Big 5’s was better, and its stock is cheaper, yet the company lost more post-earnings value.

As a value investor, this is what I call an opportunity, or an irrational example of performance in the market. Typically, when such an event occurs, gains are often created, as the market tends to value companies correctly over an extended period of time.

With that said, I would strongly consider additional due diligence in favor of Big 5 if seeking an investment in this space. Clearly, Big 5 is growing faster, improving more rapidly, and is valued cheaper, with a greater volume of new consumers shopping at their stores. Unfortunately, the same can’t be said for Dicks.

The article Did the Market Hand You a Post-Earnings Opportunity? originally appeared on Fool.com and is written by Brian Nichols.

Brian Nichols is long Big 5. The Motley Fool has no position in any of the stocks mentioned.

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