Hibbett Sports Inc (NASDAQ:HIBB), a US$388.4m small-cap, is a retail company operating in an industry which has experienced a structural shift in terms of digitalization. Growth has been a result of investment in streamlining distribution and improving website platforms to accommodate the shift in spending. Retail analysts are forecasting for the entire industry, a positive double-digit growth of 11.5% in the upcoming year , and a massive growth of 40.3% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. I’ll take you through the retail sector growth expectations, as well as evaluate whether Hibbett Sports is lagging or leading its competitors.
What’s the catalyst for Hibbett Sports’s sector growth?
E-retailing is expected to remain the fastest growing sales channel, shifting the retail landscape. Significant number of retail store closures and bankruptcies were an indication of both changing consumer preferences and rising online competition. In the past year, the industry delivered growth of 8.1%, though still underperforming the wider US stock market. Hibbett Sports lags the pack with its negative growth rate of -14.4% over the past year, which indicates the company has been growing at a slower pace than its retail peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with Hibbett Sports poised to deliver a -19.6% growth compared to the industry average growth rate of 11.5%. As an industry laggard, Hibbett Sports may be a cheaper stock relative to its peers.
Is Hibbett Sports and the sector relatively cheap?
Retail companies are typically trading at a PE of 22.77x, relatively similar to the rest of the US stock market PE of 19.86x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 13.1% compared to the market’s 10.6%, potentially illustrative of past tailwinds. On the stock-level, Hibbett Sports is trading at a lower PE ratio of 10.51x, making it cheaper than the average retail stock. In terms of returns, Hibbett Sports generated 11.3% in the past year, which is 1.8% below the retail sector.
Hibbett Sports is a retail industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Hibbett Sports is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Hibbett Sports’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has HIBB’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Hibbett Sports? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.