Please ensure Javascript is enabled for purposes of website accessibility

Why Big 5 Sporting Goods Corporation Stock Popped 24.8% in November

By Steve Symington - Updated Dec 8, 2016 at 8:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The sporting-goods retailer jumped after a predictably strong quarter.

Image source: Big 5 Sporting Goods Corporation

What happened

Shares of Big 5 Sporting Goods Corporation (BGFV -8.88%) rose 24.8% in November, according to data from S&P Global Market Intelligence, after the sporting-goods retailer announced strong third-quarter 2016 results.

So what

To be fair, this didn't come as a complete surprise; in October, I noted that Big 5 Sporting Goods shares jumped after Deutsche Bank analyst Mike Baker increased his rating and per-share price target on Big 5 stock, citing climbing merchandise margins and accelerating sales trends given the bankruptcy liquidations of several competitors.

Sure enough, Big 5 Sporting Goods enjoyed a solid 6.8% increase in same-store sales during the quarter, while revenue still climbed 3.3%, to $279 million -- and this despite an unfavorable $8.9 million impact to net sale comparisons given a calendar shift from a 53-week fiscal year in 2015. Meanwhile, net income per share climbed more than 35% year over year, to $0.38.

"We are very pleased to deliver an exceptionally strong third-quarter performance," Big 5 CEO Steven Miller added, "with earnings meaningfully above the prior year as well as the high end of our guidance range. Results were driven by strong sales growth, including increases in both customer transactions and average sale, as well as improved merchandise margins, and clearly reflected the benefit from the closure of over 200 Sports Authority and Sport Chalet store locations in our markets."

Now what

On top of that, Big 5 Sporting Goods was able to take advantage of its strong cash flow to reduce borrowings under its credit facility by $42.4 million, or 65%, compared with last year's third quarter, even as it continued to repurchase shares and announced a 20% increase to its quarterly dividend, to $0.15 per share.

In the end, assuming Big 5 Sporting Goods can sustain this momentum and continue capitalizing on the diverted traffic from its former competitors, while at the same time improving its balance sheet and rewarding shareholders through capital returns, I see no reason its stock won't also continue delivering market-beating returns going forward.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Big 5 Sporting Goods Corporation Stock Quote
Big 5 Sporting Goods Corporation
BGFV
$12.04 (-8.88%) $-1.17
Deutsche Bank Stock Quote
Deutsche Bank
DB
$8.93 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
379%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.