Closeout big box retailer Big Lots (NYSE:BIG) continues its run as serial CEO Eddie Lampert's strongest operation. After the release of its fiscal first quarter results, the company's stock soared well into the double digits, hitting a two-year high in the process. In isolation, the numbers aren't too appealing -- sales barely budged forward, and earnings cascaded down more than 25%. Still, the retailer was able to beat estimates (by a long shot) and deliver bullish enough guidance that investors and analysts alike saw little reason to complain. At these elevated levels, is Big Lots still a buy?

Good, but is it enough?
With same-store sales up roughly 1% in the just ended quarter and full year same-store sales guidance 1%-3% higher than in 2013, Big Lots is one of few aging big box stores that is still providing attractive unit-level figures. The stock is also trading at nearly 15 times its expected forward earnings, putting it in the same elevated territory as TJ Maxx parent TJX Companies (NYSE:TJX). While these aren't bad businesses -- the latter has been a market favorite for five years -- this sets the bar high for performance. Lately, TJX hasn't been a stellar stock to own, even though its home goods section recently posted a two-year comparable sales gain of 10% and its European sales were up 8% in the last quarter. The problem was a five-year gain of more than 250%, yielding expensive valuation metrics.

Big Lots, which has traded similarly well over the past couple of years, is improving its same-store sales figures as well, and has slimmed down to a more efficient machine. The company's Canadian business has officially switched to discontinued operations on the income statement. But with 1% sales growth in the just ended quarter and full year earnings guidance that shows the distinct possibility of a decline, do investors really want to pay 15 times earnings and an EV/EBITDA of 8.15 times? Dollar General, which certainly competes for the same customers but with a different merchandising strategy, holds a forward P/E of 13 times and an EV/EBITDA of more than 9 times (a product of its heftier debt load). Dollar General's average estimates for full year 2016 earnings are more than 16% above the current year's guidance for $3.50 per share.

The source of optimism
Using some typical metrics, Big Lots doesn't look like a particularly appealing deal. But instead of looking at sales and earnings growth, investors should focus on increasing efficiency (despite this past quarter's deterioration in gross margins) and cash flow. For the current full year, Big Lots is set to earn $170 million in continuing operating cash flow. As the company leaves behind its Canadian operations and closes down more underperforming U.S. locations, this cash flow should shine brighter.

Investors want to keep an eye on margins, both near the top and bottom lines of the income statement. Since Big Lots isn't likely to be a big-time grower, it needs to continue to maximize results from existing operations. While it may not be a bargain today, Big Lots still has potential to go higher yet.