Why Savers Value Village Stock Just Crashed

Savers Value Village (NYSE: SVV) stock tumbled 28.6% through 12:15 p.m. ET Friday, despite largely meeting Wall Street analyst targets for both sales and earnings last night.

Heading into the Q3 report, analysts expected Savers Value to earn $0.14 per share, adjusted for one-time items, on sales of $427.3 million. The international thrift store chain nailed the earnings target, and only missed the sales target by a hair, reporting $426.9 million.

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Savers Value Village Q3 earnings

Between same-store sales gains of 5.8% and expanding its store count, Savers Value grew sales more than 8% year over year in Q3. The company, which operates across Australia, Canada, and the U.S., saw its greatest strength in the struggling U.S. economy, where SSS growth was an outsize 7.1%, and total sales growth passed 10%. CEO Mark Walsh said pronounced himself "pleased with our third-quarter results, driven by disciplined execution and a strong value proposition."

And yet, this was all just the good news.

The bad news is that Savers Value's $0.14 per-share "profit" was actually only a non-GAAP number. When calculated according to generally accepted accounting principles (GAAP), Savers Value actually lost money -- $0.09 per share -- in the quarter, reversing its year-ago profit.

Is Savers Value stock a sell?

Turning to guidance, Savers Value insists it will still end up profitable by the end of this year, earning $0.10 to $0.13 per share on sales approaching $1.7 billion. (Adjusted profit is forecast to range from $0.44 to $0.46). The problem is, though, if Savers Value earns, say, only $0.10 this year, even at $9.60 per share, that puts the stock's valuation at 96x earnings.

Paying 96x earnings for a thrift store stock doesn't look like a bargain to me.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.