Saturday, July 11, 2015

"This roller coaster stock market wants to make you reach out to a comfort stock. This old friend has been in business 66 years and comes at a slight discount. I am talking about Dick's Sporting Goods Inc."

Dow Jones Industrial Average 17,760 (Down) Week ending 07/10/2015

So how is your stomach doing in these roller coaster US Markets? We even had a day with the NYSE main floor halted for some hours , though 80% of the trades happen on sister electronic trading exchanges anyway. 

The whole week was very disconcerting with Apple Inc. stock breaking through a main bottom support level then suddenly bouncing right back the next day. Even with the bounce back it was a worrisome week for the retail investor. 

A familiar name that I like and that falls within my PEG and Return on Equity rules is Dick's Sporting Goods Inc., (Symbol DKS, $51.19). DKS has a PEG Ratio of 1.25 and a Return of Equity of 19.41. This company with 603 stores is financially in good shape with a current ratio of 1.57 and has a low amount of debt.  DKS did $6.9 Billion dollars in sales last year. The company has 93.6 million shares outstanding and currently pays a dividend at a rate of 1.09%. Insider buying has been positive.

The stock has been muddling along because of investors worries about online competition. Still over a one year period the stock is up 11.53% and YTD it is up 3.10%.

On the earnings side, Dick's is projecting $3.18 per share in 2015 and then $3.55 per share in 2016 and a projected PE of 14.48. The One year EPS growth rate has been 11.3%. The IBD earnings rating on the company is 82, so a pretty solid company for a roller coaster market.

I think Dick's diversified product line of Sporting Equipment, Footwear, Hunting and Fishing equipment, Sportswear and Fitness equipment makes it very resistant to on-line shopping. Dick's products tend to lend them selves to the brick and mortar store experience where you can touch and feel the products. Hard to tell the weight and balance of a fishing rod on-line!

I could see DKS being the target of Private Equity purchasers trying to buy it at a discount here and add a premium. Recent articles have suggested the same.

Analyst are pretty evenly split between Buy and Hold on their opinions on the stock.

I think it is the perfect stock for these markets with the expectation of a 10% return per year and no worries on the roller coaster market. People are going to buy the stuff they sell such as Under Armor sportswear, Callaway Golf equipment and all kinds of sneakers.

(Also the equipment for the ever popular US sport now of Lacrosse) 
So strap on your seat belt in this roller coaster market and pick up a little DKS so that you can keep calm and not worry.

Have a great gardening or beach or mountain lake weekend,


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