Who says bigger is always better? With only 202 stores, Books-A-Million
Second-quarter numbers released after the bell yesterday were rather mundane. Books-A-Million profited, well, a million. Earnings of $0.06 were two cents below last year but two cents ahead of the lone analyst's forecast. With comps remaining flat, sales managed to crawl fractionally higher to $114.1 million. Keep in mind, though, last year's June release of Scholastic's
Year to date, earnings have surged to $0.13 from $0.02 on revenues that climbed 5.2% to $222.6 million. After a 7.1% spike last quarter, same-store sales are higher by 3.3%.
Both Borders and Books-A-Million have just raised full-year guidance, but Books-A-Million's 35% growth outlook is twice as optimistic as Borders' 13% to 16%.
With a market cap of only $112 million, Books-A-Million is trading at less than one-fourth of the $470 million that has been run through the company's cash registers over the past 12 months. The firm's price-to-sales ratio of 0.23 is well below that of its traditional brick-and-mortar rivals and a league apart from the 2.6 at Amazon.com
By any other measure, Books-A-Million looks equally cheap. The price-to-book ratio of 0.82 stacks up well next to Barnes & Noble's 1.8 and Borders' 1.55, the PEG ratio of 0.88 is beneath the industry average, and with $39 million in free cash flow, the company's EV/FCF ratio is less than 3.5. This is after the stock has doubled over the past year.
Of course, this is not to imply that Books-A-Million is spotless -- for one thing the company carries a hefty debt load. However, with strong growth prospects, enticing valuations, and a brand-new dividend payment, investors who choose to read more than the firm's cover may find the story inside to their liking.
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Fool contributor Nathan Slaughter likes to alternate between fiction and nonfiction reading. He owns none of the companies mentioned.