Ollie's Bargain Outlet Holdings Inc (OLLI, Financial) recently experienced a daily loss of 4.3%, and over the past three months, its stock has dipped by 1.55%. Despite these fluctuations, the company boasts an Earnings Per Share (EPS) of 2.54. Investors are keen to determine if Ollie's Bargain Outlet Holdings' current market performance truly reflects its intrinsic value. This article delves into the valuation analysis of OLLI, providing readers with a comprehensive understanding of its fair value.
Company Introduction
Ollie's Bargain Outlet Holdings Inc is a distinguished retailer known for offering brand-name merchandise at significantly reduced prices. The company has carved a niche in the market with its unique shopping experience, combining a treasure hunt atmosphere with an engaging value proposition and witty advertising. Operating across the Eastern United States, Ollie's Bargain Outlet Holdings has seen rapid growth and consistent store performance. With a current stock price of $73.05 and a market cap of $4.50 billion, the question arises: how does this compare to the company's Fair Value (GF Value) of $74.29?
Summarize GF Value
The GF Value is a proprietary measure that provides an estimate of a stock's intrinsic value, factoring in historical trading multiples, a GuruFocus adjustment for past performance, and future business prospects. It serves as a benchmark for the stock's ideal fair trading value. When a stock's price significantly deviates from the GF Value Line, it suggests potential overvaluation or undervaluation, influencing future returns. Ollie's Bargain Outlet Holdings (OLLI, Financial) currently appears to be fairly valued, with its market price closely aligning with the GF Value, indicating that the long-term return of its stock is likely to mirror the company's business growth rate.
Financial Strength
Assessing a company's financial strength is crucial to avoid the risk of capital loss. Ollie's Bargain Outlet Holdings' cash-to-debt ratio of 0.54 ranks favorably within its industry, indicating a fair balance sheet and a solid foundation for financial resilience. This assessment is supported by GuruFocus, which rates the company's financial strength as 7 out of 10.
Profitability and Growth
Profitable companies generally present less risk, and Ollie's Bargain Outlet Holdings has a solid track record of profitability, with a commendable operating margin that surpasses most of its industry peers. The company's strong profitability is reflected in its consistent earnings, with a revenue of $2 billion and an EPS of $2.54 over the past year. However, when evaluating growth, the company's average annual revenue growth is impressive, but its 3-year average EBITDA growth rate suggests potential challenges when compared to industry counterparts.
ROIC vs WACC
An insightful way to gauge profitability is by comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). A higher ROIC than WACC indicates value creation. Ollie's Bargain Outlet Holdings' ROIC of 8.87% over the past year, exceeding its WACC of 5.49%, suggests effective capital allocation and shareholder value generation.
Conclusion
In summary, Ollie's Bargain Outlet Holdings (OLLI, Financial) appears to be fairly valued in the current market. The company's financial health is robust, and its profitability is noteworthy. However, growth metrics indicate areas for potential improvement. For a deeper insight into Ollie's Bargain Outlet Holdings' financials, interested parties can explore its 30-Year Financials here.
To discover high-quality companies that may offer above-average returns, consider visiting the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
