Why Academy Sports and Outdoors Stock Just Dropped
Key Points
Dick's Sporting Goods missed on earnings this morning.
Investors are worried Academy Sports may be suffering as well.
They may be right -- but remember that Academy Sports stock is only half the price of Dick's.
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Academy Sports and Outdoors (NASDAQ: ASO) stock slipped 3.3% through 10:20 a.m. ET Tuesday -- and it's all Dick's Sporting Goods' (NYSE: DKS) fault!
Dick's reported Q2 earnings results this morning, missing on both earnings and sales, then guiding investors to expect further misses throughout the year. Think that might make investors in other sporting goods retailers just the tiniest bit nervous?
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Well, it did, and that's why Academy Sports stock is down today on no news of its own.
Image source: Getty Images.
Dick's Q2 earnings
Dick's reported a $3.50 per share GAAP profit on sales of less than $5.6 billion. Sales surged 53% year over year, but profits plunged 26%, despite Dick's absorbing rival Foot Locker's business and benefiting from its revenue stream.
Worse, management guided investors to expect sales weaker than analysts' expected $22.4 billion (Dick's is promising at most $22.2 billion), and earnings potentially as low as $11 per share -- well below the consensus estimate of $14.20 per share.
What this means for Academy Sports stock
Now here's the good news: Academy Sports is not Dick's Sporting Goods.
Don't get me wrong: if sporting goods sales weaken across the industry, that's going to hurt Academy Sports just as much as it hurts Dick's. The thing is, though, these two stocks are not starting from the same place.
Dick's shares cost nearly 18 times earnings -- even after today's massive sell-off. Academy Sports stock, in contrast, trades at more than a 50% discount to Dick's -- at just 8.2 times earnings. What's more, analysts forecast that Academy can grow its earnings more than 11% annually over the next five years, versus just an 8% projection for Dick's.
Academy Sports stock is cheaper than Dick's. It's growing faster. That makes Academy Sports stock a much better bargain.
Should you buy stock in Academy Sports And Outdoors right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Academy Sports And Outdoors. The Motley Fool has a disclosure policy.
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