While most brick-and-mortar retailers are finding it tough to navigate an e-commerce-driven world, there are some noteworthy exceptions. Take discount retailer Ollie's Bargain Outlets Holdings Inc (OLLI 2.20%). The store that prides itself on buying "Good Stuff Cheap" reported its fourth-quarter earnings recently and, once again, turned in solid numbers. For the quarter, total net sales rose to $356.7 million, a robust 26% increase year over year, and adjusted earnings per share rose to $0.51, an even better 31% increase year over year.

Ollie's Metrics 2017 Q4 2016 Q4 Change
Net sales  $356.7 million $283.4 million 25.9%
Adjusted EPS $0.51 $0.39 31%
Operating margin 15.3% 14.3% 100 basis points
Store count 268 234 14.5%

Data source: Ollie's Bargain Outlets Holdings Inc.

While the numbers look good, there might be even more reasons to be bullish on the company -- and to believe it can keep producing these strong results for years to come. Indeed, in the company's conference call, transcribed by S&P Global Market Intelligence, management made it clear that the pipeline for deals was stronger than it had ever been, there is still plenty of room for store expansion, and the company's balance sheet was strengthening.

Let's dig deeper to see if these reasons are enough to justify the premium valuation Ollie's shares currently fetch.

Colored tags displaying sales for half price and 50% off.

Ollie's Bargain Outlets is popular with bargain shoppers because it holds great sales and lives up to its motto, "Good Stuff Cheap." Image source: Getty Images.

Treasure hunting

One of the secrets to Ollie's success is fostering a true treasure-hunt shopping experience, as customers never quite know what deals to expect when they browse the store aisles. This atmosphere is contingent on the company finding great bargains from its vendors, and on that front, management insists the close-out environment has never been better. One of the factors CEO Mark Butler credited for helping the company find an increasing amount of deals was Ollie's growing size. He said:

Our overall deal flow remains very strong, and we're see[ing] a growing availability of product from both existing and new vendors. We're strengthening our relationships with major manufacturers and gaining better access to merchandise. Scale matters. And with 274 stores, we strive to be the first call for the majority of all these available deals. The closeout buying environment remains as strong as I've ever seen, and I'd like where Ollie's is positioned as a growing force in one of the most dynamic retail sectors in America today.

One opportunity Ollie's management seemed particularly excited about was the recent Toys-R-Us bankruptcy. Just days before the earnings release, Ollie's advertised in The Wall Street Journal that it was ready and willing to buy excess toy inventory from manufacturers, distributors, and retailers affected by the closings. Butler called toys a "substantial portion" of the company's business and said the purpose of the ad was to take advantage of a unique opportunity and "to remind everybody how ... we make a living."

Store count on the rise

Ollie's finished the fourth quarter with 268 stores, up from the 234 stores it operated at the end of 2016. That's a 14.5% increase in its store count over the past year, and management believes it can continue to expand in the 14% to 15% range for the foreseeable future. Management expects to open 36 to 38 stores in 2018, with the second half of the year seeing more openings than the first half.

Ollie's mascot is holding a paper that reads "Buyouts! Overstocks! Closeouts!" while the picture reads more stores are coming soon.

Ollie's management believes it can grow the company's store locations at a mid-teen percentage rate for years into the future. Image source: Ollie's Bargain Outlets Holdings Inc.

The best part about Ollie's store expansion plans is that it has such a long runway of growth left. The chain currently operates locations in only 20 states. This past year, the company opened its first location in Rhode Island, and in 2018, it expects to open its first stores in Arkansas and Louisiana. Management believes the company can ultimately grow into 950 locations, which is three and a half times as many stores the company runs now. Given that Ollie's is only present in 20 states now, and some of those states are far from saturated, I find the target to be feasible.

Less debt, more cash

Another thing for shareholders to be excited about is that the company has been actively paying down debt to shore up its balance sheet. In years past, Ollie's used debt to finance expansion as it opened new stores, but the company is now generating enough cash flow to grow its store count while paying down its existing debt. In 2017, Ollie's paid off approximately $146 million in term loan debt, ending the year with approximately $49 million of debt and $39 million in cash.

The company said it will use savings from the new tax legislation to accelerate debt payments, and it expects to finish 2018 with no debt and about $70 million to $80 million of cash on its balance sheet. At that time, management said, it will have a strategic discussion on how best to return capital to its investors going forward. So, while talks of buybacks and dividends are not yet on the table, it's not hard to envision a more palatable future for shareholders.

Shares too steep a price?

With strong growth and many catalysts ahead, investors will have to pay up to participate in Ollie's journey ahead. Based on the midpoint of Ollie's forward adjusted earnings guidance of $1.65 to $1.69 per share, Ollie's currently trades at a forward P/E ratio of about 36 -- not cheap by any means.

That being said, Ollie's is one of those rare regional retailers that seem to have a clear path to national expansion. Its balance sheet is strengthening as it expands, not weakening, meaning it won't be hamstrung by financing reckless expansion through debt. The company seems to have perfected a shopping experience that appeals to bargain-loving customers everywhere, and the retailer's loyalty program, dubbed Ollie's Army, is 9 million members strong.

It is for these reasons that I believe long-term investors will enjoy market-beating returns even if Ollie's shares aren't quite the bargain its customers are used to. That being said, if the valuation makes some investors reluctant to buy shares, this is definitely a stock to put on your watchlist for consideration in any future weakness.