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Savings Experiment: Snow RemovalBig Lots (NYSE: BIG) is
the largest broadline closeout retailer in the United States. Stores offer such staples as food, health and beauty products, plastics, furniture, toys, lawn tools, electronics, apparel and small appliances. The goods are generally products that have been overproduced, or discontinued, and are typically offered at 20-40 percent below discounters' prices. The company currently operates 1,353 stores in 47 states. Wholesale operations are conducted through Big Lots Wholesale, Consolidated International and Wisconsin Toy outlets. Target (NYSE: TGT) and Wal-Mart (NYSE: WMT) are major competitors.
The firm pleased investors last week, when it reported Q4 EPS of 93 cents and revenues of $1.41 billion. Analysts had been looking for 84 cents and $1.41 billion. Management also guided Q1 EPS to 30-35 cents (26 cent consensus) and FY09 EPS to $1.70-$1.80 ($1.53 consensus). Wedbush Morgan and Soleil subsequently declared the issue a "buy" and issued price targets of $26 (W) and $32 (S).
The stock
popped through 90-day moving average resistance on the news. Since then, it has been defining a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers recommend the issue with one "strong buy", two "buys", five "holds" and one "underperform". Analysts see a 17% average annual growth rate, through the next five years. The stock's P/E ratio (13.19), PEG ratio (0.79), Price to Sales ratio (0.40), Price to Book ratio (2.94), Price to Cash Flow ratio (7.83), Price to Free Cash Flow ratio (6.99), Return on Assets (9.56%) and Return on Investment (13.81%) compare favorably with industry, sector and S&P 500 averages. Over the past 52 weeks, BIG has traded between $12.40 and $36.15. A stop-loss of $17.40 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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