The Buckle (BKE) is an upscale clothing retailer with a quite beaten-down share price. Despite recent underperformance, I believe the company fundamentals are still quite strong.
Things to Love About Buckle
1: No Debt
Throughout the financial crisis, large debt loads weighed on company balance sheets and had serious implications for the firms that let their borrowing get out of control.
Other companies, however, have a history of operating with low debt levels, and many choose to issue no debt at all. Instead of debt, these companies hold cash and short-term, highly liquid assets in order to make acquisitions and fund other investments in future growth.
For these reasons, companies with no debt are defensive plays suitable for investors worried about the possibility of another downturn. With no debt, Buckle has the ability to withstand downturns in consumer spending better than other retailers carrying high debt loads.
2: High Current Ratio
Continuing with the fortress balance sheet trend, Buckle has a current ratio of 3.687. The current ratio compares current assets to current liabilities to measure a company's ability to remain solvent. Buckle's current ratio is in the 84th percentile in its industry (Apparel Stores).
3: Dividend Yield
Buckle has an $0.80 annual dividend, which at the current stock price works out to a 2.13% yield. Dividends are important for defensive investors because over time, dividend-yielding companies tend to outperform companies without dividends. Buckle has a payout ratio of 92.15%, meaning it pays shareholders almost all of its earnings. This compares to an industry average of 37.36%.
4: Strong Growth History
Buckle has a trailing 5-year EPS growth of 20.88% and a forward 3-5 year EPS growth of 10.33%. While the projected growth is lower than that of many retail peers, it's important to note that Buckle is a high-end retailer. As such, in tough economic times, it has a harder time competing with value retailers -- yet it has still turned in a solid performance over the past few years. When the recovery picks up and Americans' disposable income increases, Buckle could see sales increase dramatically.
5: Reasonable Valuation
Buckle has a TTM P/E of 11.65, which is much lower than the ~17 PE of the retail industry as a whole. Given Buckle's strong and consistent growth, this valuation seems attractive.
With no debt, good growth history, and a strong dividend payout, The Buckle might be worth a look. Its unique position as a no-debt entity in the typically heavily indebted retail industry makes it an interesting defensive play.
Disclaimer: I am an individual investor, not a licensed investment advisor or broker dealer. Investors are cautioned to perform their own due diligence. All information contained within this report is presented as-is and has been derived from public sources & management. Always contact a financial professional before making any major financial decisions. All investments have an inherent degree of risk. The future is uncertain, and actual results may be materially different from those expected. Past performance is no guarantee of future results. All views expressed herein are my own, and cannot be interpreted as the views of my employer(s) or any organizations I am affiliated with. Presentation of information does not necessarily constitute a recommendation to buy or sell. Never make any investment without conducting your own research and reading multiple points of view.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.