William Blair & Co. yesterday announced DKS would earn $1.53 per share in fiscal 2003 and $1.77 in fiscal 2004. In their announcement, they went on to say, "We believe that Dick's, with a still low 2.3% share and a proven ability to increase market share, is well positioned to grow at an above-average rate over the next three to five years."
Now, let's do a little extrapolation from this data. Wal-Mart(WMT) currently is trading for around $55.00 a share with 2003 fiscal earnings projected at $1.79, so says First Call, and an expected growth in the area of Dick's.
Forward looking PE = 30.72
Going through the same process with Dicks, we can come up with a forward looking PE of 13.39 (20.50/1.53).
Neither Wall Street, nor I, beleives Dicks deserves a Wall-Mart like mutiple....yet. Having said that, they are a core growth company, and at this point deserve at least a mutiple equal to the slow growth Dow Jones Industrial Average at 22.7.
Just using a mutiple of 20 gives us a fair valuation of this stock around $30 a share.
You gotta like a 50% return in less than a year. I'm buying anytime it dips below $20, this stock is another Kohls.
If you like this kind of analysis, look at Galyan's (GLYN). At close Wed at $13.60. Estimated next year earnings at $1.33, giving a PE of 10.2, beating Dicks! (I wish they would change their name.) Five year earnings growth estimated at 22.5%
The Dicks store in Cincinnati put the local sporting good stores out of business. The store is awesome. Never hugely busy. Prices are steep compared to Walmart. But better quality. Got a lot of soccer items this fall at Dick's. Glad to see the stock is publicly traded, with a market cap of under $1B. This Stock is going to grow! With reasonable pace of store openings, a P/E Ration of 25 is very reasonable to expect. So a share price approaching $50 in a couple years is very reasonable.