Big Lots, Inc. (NYSE:BIG), which is in the multiline retail business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Big Lots’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Big Lots?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Big Lots’s ratio of 7.34x is trading slightly below its industry peers’ ratio of 11.62x, which means if you buy Big Lots today, you’d be paying a fair price for it. And if you believe that Big Lots should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Big Lots’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Big Lots look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 7.9% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Big Lots, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in BIG’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at BIG? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on BIG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Big Lots. You can find everything you need to know about Big Lots in the latest infographic research report. If you are no longer interested in Big Lots, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.