Big 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 1,354 stores in 47 states. Wholesale operations are conducted through Big Lots Wholesale outlets.
The firm pleased investors last week, when it reported Q1 EPS of 42 cents and revenues of $1.15 billion. Analysts had been expecting 36 cents and $1.14 billion. Management also guided Q2 EPS to 21-25 cents (23 cent consensus) and FY08 EPS to $1.80-$1.90 ($1.78 consensus). Wedbush Morgan subsequently reiterated its "strong buy" rating on the shares and Piper Jaffray upped its recommendation to "buy".
BIG shares
popped on the earnings news and have since been defining a bullish "flag" consolidation pattern. Stocks frequently exit flags 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 two "strong buys", three "buys", four "holds" and one "underperform". Analysts see a 15% average annual growth rate, through the next five years. The stock's PEG ratio (1.18), Price to Sales ratio (0.54), Price to Free Cash Flow ratio (8.08), EPS Growth rate (61.54%), Return on Assets (10.05%), Return on Investment (14.34%) and Return on Equity (18.07%) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $12.40 and $32.16. A stop-loss of $27.70 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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