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While DICK'S Sporting Goods, Inc. (NYSE:DKS) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at DICK'S Sporting Goods’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is DICK'S Sporting Goods still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 20% below my intrinsic value, which means if you buy DICK'S Sporting Goods today, you’d be paying a fair price for it. And if you believe that the stock is really worth $143.51, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that DICK'S Sporting Goods’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of DICK'S Sporting Goods look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for DICK'S Sporting Goods, at least in the near future.
What this means for you:
Are you a shareholder? DKS seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on DKS for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on DKS should the price fluctuate below its true value.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 2 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in DICK'S Sporting Goods.
If you are no longer interested in DICK'S Sporting Goods, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.