Shares of discount-retailer Big Lots ( BIG 5.34% ) fell on Friday after the company reported results for the third quarter of 2020. It's actually hard to find much to nitpick from the third-quarter report, but perhaps management's lack of forward guidance was enough to shake out low-conviction investors. As of 12:30 p.m. EST, Big Lots stock was down 9%.
In Q3, Big Lots reported revenue of almost $1.4 billion, up 18% year over year. On the bottom line, the company reported net income of $30 million. This breaks down to $0.76 in earnings per share (EPS), ahead of guidance. Management had guided for EPS of $0.50 to $0.70. Going forward sales look strong -- it put holiday items out early and that seems to be paying off. That said, management stopped short of giving official forward guidance.
Considering Big Lots stock's incredible run so far, lack of forward guidance could be enough for some investors to book their gains and move on. That's because it's likely many Big Lots investors are new. The stock traded in deep value territory at the bottom of the market crash and many likely bought into this cheap stock somewhere along the ride back up. Since the bottom, the stock is up over 300%.
Big Lots today also declared a dividend of $0.30 per share, which puts the current dividend yield over 2%. That's a good dividend. And the stock trades at a trailing price-to-earnings ratio under three. That's a really low valuation. Remember, the company is in the middle of a strategic turnaround. Given the company's appealing valuation metrics, it's worth dissecting the business plan to see if this could be a cheap turnaround stock to buy.