Big Five Sporting Goods' Short-Term Woes Are of Little Concern

Big Five Sporting Goods (NASDAQ: BGFV  ) is a regional player in the retail sporting goods industry that offers compelling value to investors, as long as the recently issued guidance doesn't scare them off. Considering its sub-12 times forward earnings ratio, Big Five Sporting Goods has delivered massive growth during the past year with more than 80% earnings growth. The number is even more impressive considering that the prior year included massive firearms and ammunition sales. This past quarter wasn't a banner one for Big Five (and the retail industry at large), but the compelling factors remain for this small-cap sporting goods store.

An OK end to a great year
Big Five had a very difficult comparable quarter to beat, but the company was able to post substantial bottom-line gains of 20% compared to 2012's numbers. Same-store sales declined slightly (0.5%) due to lower traffic, and the aforementioned guns and ammo rush in the last months of 2012. Top-line sales ticked up nearly 2%, to $248 million. On the net income line, the company earned $0.23 per share -- a good bit ahead of analyst estimates and last year's $0.19 per share.

For the full year, Big Five delivered 3.9% same-store sales growth and $1.27 per share in net income -- 80% ahead of last year's $0.69 per share.

Looking ahead, things aren't as appealing. With continued pressure from the high year-ago comparable sales, Big Five sees first-quarter same-store sales down in the high single digits. Also hurting the company is the serious drought on the west coast of the United States. Winter gear simply isn't selling. Management did mention, however, that with winter and firearms comps excluded, the company is still tracking positive year-over-year sales figures.

The market wasn't thrilled, and sent shares down, but that may be a myopic reaction to what is otherwise a growing business.

Priced to sell
The tough comparable quarters and unfavorable weather are hurting Big Five, but that has nothing to do with the long-term viability of the business. As evident in 2013's full year results, the company is growing quickly, with both new stores and existing ones. In the coming year, Big Five anticipates 15 net new store openings. While that's not a massive growth strategy, the compelling same-store sales figures bode well for an attractive ROIC on capital deployed toward store growth.

As mentioned above, Big Five Sporting Goods is a very attractive business on a valuation level. At 11.5 times forward expected earnings, Big Five is well under Dick's Sporting Goods, which trades at 17.5 times earnings, in addition to Hibbett Sports' near 20 times forward earnings. Big Five is, by a long shot, the smallest player of the three and has a substantial growth runway -- adding more fuel to the bullish story.

Investors should not worry about the near-term softness here, as Big Five is set to resume its growth in the long run.

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