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Harlan Kessler
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Harlan currently works as a Research Associate specializing in Investment Communications. Prior to his current role, Harlan spent seven years in investment management. The first two years were spent creating portfolios for retail investors, followed by five years in Market Risk for a major... More
  • The Buckle, Inc. (BKE) : Cheap Growth & Shareholder Friendly 0 comments
    Mar 16, 2011 4:06 PM | about stocks: BKE, ANF, TGT
    COMPANY PROFILE:

    The Buckle, Inc. (NYSE: BKE) is a leading retailer of medium to better–priced casual apparel, footwear and accessories for fashion–conscious young men and women. The Company currently operates over 400 stores in 41 states, under the names Buckle and The Buckle.

    Buckle markets a wide selection of brand names and private label casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The Company emphasizes personalized attention to its guests (customers) and provides individual customer services such as free alterations, layaways, and a frequent shopper program.

    VALUATIONS:

    Price:  $36.79
    Market Cap: $1.73B
    Shares Outstanding: 47.13M
    P/E: 12.85
    EPS 5 Year Growth Rate: 21.8%
    Debt %: 0
    Profit Margin: 22.7%
    % MGMT Owns: 45%
    Beta: .99
    Dividend Yield: 2.2%
    Dividend 5 Year Growth Rate: 34.4%
    Payout Ratio: 21%
    PEG: .59

     

    INVESTMENT THESIS:

    • The company appears to be cheap. It has a P/E ratio under 13. Compare this to an industry average of almost 22. Secondly companies are considered fairly valued when their PEG Ratio equals 1. BKE currently has a PEG of approximately .59.
    • The Buckle currently has zero debt. Having a solid balance sheet will enable them to continue their growth going forward.
    • A dividend yield of 2.2% is average but it has a 5 year growth rate of almost 35%. Not only are shareholders being rewarded with capital appreciation, they are being paid a healthy yield as well. A payout ratio of 21 also indicates that they have plenty of room to not only continue to pay a dividend but also continue to increase it.
    • Management owns 45% of the company. The people that know best clearly strongly believe in their company and its growth prospects.
    •  BKE currently has over 400 stores in 41 states. Compare this with ANF which currently has over 1000 locations.

     

    RISKS:
    •  A slower than expected recovery of the US economy and specifically the retail sector.
    • Their clothing is a fad. Clothing styles come and go if BKE falls out of favor with its target audience this could lead to dramatic decreases in EPS.
    •  Increased competition from discount stores with fashionable clothes, specifically TGT. During the recession have consumers decided value jeans are comparable to $90+ designer jeans?

    CONCLUSION:

    If you are looking for a company that will give you growth at a reasonable price as well as one that is shareholder friendly I suggest you add BKE to your watch list and perform your own due diligence on it. You can expect it to continue to be shareholder friendly as management owns 45% of the company.  As the economy and retail sector rebound, expect BKE to benefit. The company has vowed to increase same store sales by 7.9%. Also with zero debt they will have the ability to continue their expansion into new US markets.

     

    Disclosure: 

    I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: BKE, ANF, TGT
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