To quote movie character Forrest Gump, "It must be hard being a king."
Indeed. Just ask eBay (NASDAQ:EBAY), the ruler of the online marketplace, or Electronic Arts (NASDAQ:ERTS), the boss of video games, how tough it is to continually please investing critics.
Bed Bath & Beyond (NASDAQ:BBBY), a giant among household products retailers, announced record results for fiscal 2004 earnings yesterday, but you wouldn't know it by looking at its stock. Over the past 12 months, its stock has been a real yawner, despite earnings per share (EPS) that improved 26.4% year over year.
For the fourth quarter, the company earned $0.59 per share from $181 million of net income -- 25.5% growth compared with the same period a year ago. Its income was derived from $1.5 billion in sales, an improvement of 13.1% from the fourth quarter in fiscal 2003. Comparable same-store sales increased 5.1%.
Comparable same-store sales for the year increased 4.5%, leading to full-year revenue growth of 15% to $5.1 billion. The positive sales environment allowed the company to post its 13th consecutive year of record net income, which climbed to $505 million, or $1.65 per share.
Along with that strong growth, investors will take comfort in the company's operating margins, which improved to 15.4% from 14.3% in 2003. Bed Bath & Beyond's healthy profit margins allow it to have positive cash flow, creating trailing 12 months of owner earnings (or structural free cash flow) of $411.7 million. Naturally, a strong cash flow situation allows the company to keep a fresh-out-of-the-bath, squeaky-clean balance sheet containing no long-term debt and cash and marketable securities totaling $851.4 million.
So with all of the positives mentioned, why has the stock been a sleeper over the past year? Perhaps the market is no longer enamored with royalty, instead asking the question, "Is that all you've got?"
Or, maybe an enterprise that is valued at 25 times its trailing-12-months owner earnings just isn't attracting the buyers the way it used to. While Bed Bath & Beyond certainly isn't a deep bargain, it definitely warrants being watched to see if a discount purchase can be made sometime soon.
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Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.
