Bed Bath & Beyond: Rising Profits, Flat Stock (BBBY)

| About: Bed Bath (BBBY)

Eddy Elfenbein submits: If you’re new to investing, Bed Bath & Beyond (NASDAQ:BBBY) is a good stock to look at. The financials are about as straightforward as they come. No pro forma nonsense or huge “one time” charges that seem to happen every single quarter [Cendant Corp. (CD), I’m looking at you].

Here are BBBY’s financial results for the past few years:

BBBY # 1

As always, I pass the graphics savings on to you.

A few things to point out. You’ll notice that there’s a bulge in the February quarters (the company’s fourth, which technically end in early March but it’s my damn table). That’s because of the holidays so it’s important to compare similar quarters.

Another thing you’ll notice—and something that I place a lot of emphasis on—is the company’s consistency. Here’s a chart of BBBY’s trailing four-quarter sales.

BBBY # 2

That’s what I like to see, a nice smooth line. The red is Wall Street's estimate. Yes, someone is paid a great deal of money to draw that line out a few more points. Like a nine-year-old couldn't find a trend here.

Now let’s look at the operating margins. This is important.

BBBY # 3

This impresses me a lot. Operating margin is one of the purest measures of how efficiently a company is managing its business. BBBY has been doing very well lately. That last little downtick concerns me a little. But as long as the margins don't show a severe downtrend, I'm not too worried. Few things are more painful to a company than eroding margins.

Now here's the company's earnings-per-share:

BBBY # 4

Once again, we see a nice smooth line. But what isn't a smooth line is the stock chart. Shares of BBBY haven't budged in over four years. This chart pretty much sums it up:

BBBY # 5

Rising earnings and a flat stock means a plunging earnings multiple. This issue is really about risk. The stock could certainly stay flat, or even fall. Who knows...we can’t predict the future. But we can see that the company has performed very consistently, and its relative valuation is very low. That’s one of the best ways to control for risk.

Earnings are due today after the market closes.