Is The Buckle Destined for Greatness?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Every investor can appreciate a stock that consistently beats the Street without getting ahead of its fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with improving financial metrics that support strong price growth. Let's take a look at what The Buckle's (NYSE: BKE  ) recent results tell us about its potential for future gains.

What the numbers tell you
The graphs you're about to see tell Buckle's story, and we'll be grading the quality of that story in several ways.

Growth is important on both top and bottom lines, and an improving profit margin is a great sign that a company's become more efficient over time. Since profits may not always reported at a steady rate, we'll also look at how much Buckle's free cash flow has grown in comparison to its net income.

A company that generates more earnings per share over time, regardless of the number of shares outstanding, is heading in the right direction. If Buckle's share price has kept pace with its earnings growth, that's another good sign that its stock can move higher.

Is Buckle managing its resources well? A company's return on equity should be improving and its debt-to-equity ratio declining if it's to earn our approval.

Healthy dividends are always welcome, so we'll also make sure that Buckle's dividend payouts are increasing, but at a level that can be sustained by its free cash flow.

By the numbers
Now, let's take a look at Buckle's key statistics:

BKE Total Return Price Chart

BKE Total Return Price data by YCharts

Passing Criteria

3-Year* Change 


Revenue growth > 30%



Improving profit margin



Free cash flow growth > Net income growth

64.6% vs. 33.1%


Improving EPS



Stock growth (+ 15%) < EPS growth

94.7% vs. 23%


Source: YCharts. * Period begins at end of Q3 (October) 2009.

BKE Return on Equity Chart

BKE Return on Equity data by YCharts

Passing Criteria

3-Year* Change


Improving return on equity



Declining debt to equity

No Debt


Dividend growth > 25%



Free cash flow payout ratio < 50%



Source: YCharts. * Period begins at end of Q3 (October) 2009.
** Special annual dividend alters calculation. Growth is from Q4 2010.

How we got here and where we're going
Buckle picks up seven out of nine possible passing grades, which is pretty impressive in an industry with few genuine winners of late. The company only very barely misses out on another point with good-but-not-great revenue growth, but it's the discrepancy between the stock's growth and its EPS that you may want to keep an eye on. Today, Buckle's P/E is a very modest 13.1, but if this trend continues, the company might find itself with a valuation beyond its norm. What can Buckle do to keep itself on the right track and avoid a painful regression to the mean?

Fool contributor Andrew Marder has been a big proponent of the company, arguing that Buckle's steady growth strategy is more sustainable than that of other fast-expanding clothing companies, particularly True Religion (Nasdaq: TRLG  ) , which competes in the same high-end jeans segment and which has been opening stores at a much faster rate. He also points out that the company's management is stocked with career Buckle employees who know the company inside and out. These leaders have shepherded Buckle through the choppy waters of fashion since the 1970s, and have maintained impressive special dividend payouts for years without cutting into the company's cash hoard.

Buckle was once one of the cheapest apparel stocks on the market, but its strong performance in recent years has pulled its P/E in line with its peers. In one regard, however, Buckle clearly stands out. See if you can spot the difference:


P/E Ratio 

Price to Free Cash Flow Ratio 

3-Year Free Cash Flow Growth 

The Buckle




True Religion




The Gap (NYSE: GPS  )




Guess? (NYSE: GES  )




Abercrombie & Fitch (NYSE: ANF  )




Source: YCharts.

Buckle is a rare standout that's actually growing its cash flow in an industry that's been largely unable to do so. It may not be as cheap as Guess or as large as The Gap, but Buckle has outperformed both rivals for some time on one of the most important metrics for dividend investors. That fact should stand Buckle in good stead, both as an apparel investment and as a dividend holding.

Putting the pieces together
Today, Buckle has many of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy -- or to stay away from a stock that's going nowhere.

Slow and steady might win the race in Aesop's fables, but investors should also be on the lookout for stocks that have the wind at their backs and brisk momentum ahead. The Motley Fool's exclusive free report on "Three Companies Ready to Rule Retail" offers you a trio of great options that can make a great retailing-stock combination with Buckle in your portfolio. Want to learn more? Click here for the inside scoop, at no cost.

Keep track of Buckle by adding it to your free stock Watchlist.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2192606, ~/Articles/ArticleHandler.aspx, 9/27/2016 11:35:53 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,146.40 51.57 0.28%
S&P 500 2,151.58 5.48 0.26%
NASD 5,281.41 23.92 0.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 11:18 AM
BKE $24.55 Down -0.06 -0.24%
The Buckle CAPS Rating: *****
ANF $16.23 Up +0.09 +0.56%
Abercrombie and Fi… CAPS Rating: *
GES $14.35 Up +0.09 +0.63%
Guess? CAPS Rating: ***
GPS $22.12 Down -0.11 -0.49%
Gap CAPS Rating: **
TRLG.DL $0.00 Down +0.00 +0.00%
True Religion Appa… CAPS Rating: **