2 Reasons to Watch DKS and 1 to Stay Cautious

Dick's currently trades at $209.92 and has been a dream stock for shareholders. It’s returned 298% since December 2020, blowing past the S&P 500’s 82.9% gain. The company has also beaten the index over the past six months as its stock price is up 20.1%.

Is it too late to buy DKS? Find out in our full research report, it’s free for active Edge members.

Why Does DKS Stock Spark Debate?

Started as a hunting supply store, Dick’s Sporting Goods (NYSE:DKS) is a retailer that sells merchandise for traditional sports as well as for fitness and outdoor activities.

Two Positive Attributes:

1. New Stores Opening at Breakneck Speed

A retailer’s store count often determines how much revenue it can generate.

Dick's sported 3,230 locations in the latest quarter. Over the last two years, it has opened new stores at a rapid clip by averaging 34.8% annual growth, among the fastest in the consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

2. Surging Same-Store Sales Show Increasing Demand

Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Dick’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 4.3% per year.

One Reason to be Careful:

Long-Term Revenue Growth Disappoints

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Dick’s sales grew at a tepid 7.1% compounded annual growth rate over the last three years. This wasn’t a great result compared to the rest of the consumer retail sector, but there are still things to like about Dick's.

Final Judgment

Dick’s merits more than compensate for its flaws, and with its shares beating the market recently, the stock trades at 15.9× forward P/E (or $209.92 per share). Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.

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