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Stockchase Insights
Academy Sports and Outdoors
ASO-Q
PARTIAL BUY
Jun 14, 2024
Stock price when the opinion was issued
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Our PAST TOP PICK with ASO has triggered its stop at $59. To remain disciplined we recommend covering the position at this time. This will result in a net investment gain of 30%, when combined with our previous buy recommendations.
ASO is a retailer of outdoor sporting goods in the US. It trades at 8x earnings, under 2x book and supports a 25% ROE. The company just announced a large share buyback program, while recent earnings show cash reserves growing as debt is retired and shares bought back. We recommend setting a stop-loss at $37, looking to achieve $61 -- upside potential over 21%. Yield 0.8%
(Analysts’ price target is $61.21)We reiterate this outdoor sports retailer as a TOP PICK. Recently reported earnings, showed a 68% increase in free cash flow. It trades at 9x earnings, under 2x book and supports a 24% ROE. We like that cash reserves continue to grow as the company aggressively buys back shares and retires debt. We recommend trailing up the stop (from $45) to $47, looking to achieve $63 -- upside potential of 17%. Yield 0.7%
(Analysts’ price target is $62.79)Our PAST TOP PICK with ASO has triggered its stop at $47. To remain disciplined, we recommend covering the position at this time. When combined with our previous guidance, this will result in a net investment loss of 10%.
ASO is cheap at 7.7x forward earnings, however, results have been lagging year-to-date down 22% driven by a weak first quarter. ASO is also flat over the prior twelve months. The company has displayed a declining sales trend over the last few years. There are some marketing initiatives that the company is engaged in that could help drive sales in the latter half of the year, but the first quarter was quite weak. Debt has come down nicely over the last few years and while not low, it appears to be more managable now. We are not overly intrigued by ASO, but it is cheap and does pay a small dividend which gives it some appeal. In an upward sales cycle it could do better but the recent weakness shows otherwise.
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