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Last year's darling of retailing - Dick's Sporting Goods (NYSE:DKS) - got killed yesterday.

DKS shares are down about $5.13 or (-19%) to $21.47 from last summer's high of $36.80/share.

That August high came on trailing earnings [at that time] of $1.28 meaning DKS shares were trading at 28.75x actual earnings and 27.67x the final FY EPS for the year ended January 2008.

EPS grew in both the October and January quarters before coming in at $0.18 versus $0.19 in the just reported April quarter.

Now the shares are 16.3x trailing EPS their lowest valuation level since early in 2003. Ironically, analysts will probably be pulling DKS off their buy lists now that it lacks momentum.

Last summer's P/E was well above any historical multiple for DKS since its 2002 IPO and should have scared off any value investor from even thinking about it. Shortly after its IPO, DKS shares were available at $3 with FY EPS that year of $0.49 - a P/E of 6. Early in 2003, when the general market was still lagging, Dick's traded at $4.00 [split adjusted] on forward EPS of $0.53 or 15.3 times projected earnings.

If you bought when it was relatively cheap you did great, if you bought when the news was even better in mid-2007 you got killed. The difference was in the valuation.

I'm not long or short DKS, but if you always wanted to own this you might want to consider selling some LEAP puts for 2010.

January 2010 puts at a strike price of $20 last traded at $3.70 meaning your break-even would be $16.30 on shares now above $21. If you were put it would be at just 12.3 times trailing earnings of $1.32 on what has been a very nice company.

That worst case entry point of $16.30 would be equal to the absolute low hit in 2006 and almost $8 below the absolute low price touched in all of 2007. Earnings are about 50% higher now than they were when these shares last traded at $16.30.

Actual trading highs in 2006-2007-2008 were $28.10, $36.80 and $33.90 respectively.

Disclosure: I just sold myself during this write-up and wrote 10 contracts at $3.70 /share for $20 puts in Jan. 2010.

Source: Dick's Sporting Goods: A Predictable Thumping