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

Analysts have been bullish on sporting goods stores of late. On July 4, analysts at Deutsche Bank reiterated a “buy” rating on Dicks Sporting Goods Inc (NYSE:DKS). The average price target among analysts for that stock is $58, or 13.4% more than where shares currently stand.

In the past three months, the seven analysts covering Big 5 Sporting Goods Corporation (NASDAQ:BGFV) have raised their EPS estimates by 23%, both for this year and 2014.

Massive gains have been realized by Big 5 Sporting Goods Corporation (NASDAQ:BGFV) bulls

In the past twelve months, shares of Big 5 Sporting Goods Corporation (NASDAQ:BGFV) have more than tripled, bringing big gains to those who bought the stock one year ago. But, the median analyst estimate for the stock is 13.8% below the current market price.

What’s more, the company’s largest shareholder, a Connecticut-based hedge fund named Stadium Capital, has been selling shares by the boatload. Between the end of March and the beginning of June, the fund had dumped over 700,000 shares, or 22.5% of its stake in Big 5 Sporting Goods Corporation (NASDAQ:BGFV).

Big 5 Sporting Goods Corporation (NASDAQ:BGFV) has a solid balance sheet, but I think the stock may have run up a little bit too much. Its current market value is $524.1 million. Its five year net income average for 2008-2012 was $16.57 million, well below the $26.5 million figure for the years 2002-2006.

With a market cap of $6.4 billion, Dicks Sporting Goods Inc (NYSE:DKS) is a much larger chain of sporting goods stores than Big 5. Dicks Sporting Goods Inc (NYSE:DKS) also has a much larger institutional following, with nearly 30 analysts covering the stock and over 90% of outstanding shares being owned by institutional and mutual fund owners.

Dicks Sporting Goods Inc (NYSE:DKS) has a strong balance sheet, with a healthy amount of working capital and an insignificant amount of long-term debt. Turning to the income statement, Dicks Sporting Goods Inc (NYSE:DKS) has registered impressive net income growth. Over the past three years, the company has grown net income at a 42.4% CAGR. Total net income for the company in 2013 was $290.71 million.