May 19, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Big Lots (NYSE: BIG ) made a big plop this morning, the shares down 10% and counting.
So what: No mystery here, folks. The retailer had hired Goldman Sachs to help it negotiate a going-private sale to private equity, but apparently, Goldman asked for too much money and scared off the buyers. This morning, Big Lots announced it's shutting down the auction, and has decided to go it alone.
Now what: That may not be such a bad thing. After today's drop, Big Lots shares only cost 12 times earnings -- about the going rate for slower-growing Target (NYSE: TGT ) and Wal-Mart (NYSE: WMT ) , and a fair price to pay for a 12% annual grower. Free cash flow at the company is strong at about 94% of reported GAAP earnings. So while the stock's no screaming bargain, the worse I can say about it is that Big Lots is a decent operation at a decent price.
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