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Why Big Lots Stock Fell on Friday

By Jon Quast - Dec 4, 2020 at 1:13PM

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There was a lot to like in the company's quarterly report, but lack of guidance may have sunk investor confidence.

What happened

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%.

So what

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.

A frustrated man lays his head on the table with a down stock chart in the background.

Image source: Getty Images.

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%.

Now what

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

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Big Lots, Inc. Stock Quote
Big Lots, Inc.
$45.95 (5.34%) $2.33

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