Amidst a fluctuating market, Burlington Stores Inc (BURL, Financial) recently displayed a notable daily gain of 5.9%, although it has seen a slight decline of 1% over the past three months. With an Earnings Per Share (EPS) of 5.25, investors might wonder: is Burlington Stores modestly undervalued? This article delves into the valuation intricacies of Burlington Stores, aiming to provide a clear perspective on its current market standing.
Company Overview
Burlington Stores Inc operates as a prominent off-price retailer, offering a wide array of in-season, fashion-forward merchandise. The company's product range spans across several categories including women's apparel, menswear, youth apparel, baby products, beauty, footwear, accessories, home goods, toys, gifts, and coats. This diverse product mix is sourced directly from nationally recognized manufacturers and suppliers, ensuring high quality and brand value. Currently, Burlington Stores' stock is trading at $197.65 per share with a market capitalization of $12.60 billion, positioned below its GF Value of $222.93, suggesting that the stock might be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure used to determine the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and estimated future business performance. According to this valuation method, Burlington Stores (BURL, Financial) appears modestly undervalued. This assessment suggests a potential for higher future returns, given the stock's price is below the GF Value line, which is considered its fair trading value.
Given this valuation, investors might expect Burlington Stores to offer favorable long-term returns, surpassing its current business growth rate.
Financial Strength and Stability
Investigating the financial strength of Burlington Stores is crucial to understanding its investment potential. The company's cash-to-debt ratio stands at 0.19, which is lower than 70.42% of its peers in the Retail - Cyclical industry. This metric, along with an interest coverage ratio, provides insight into the financial robustness of Burlington Stores, which currently holds a financial strength rating of 5 out of 10.
Profitability and Growth Prospects
Burlington Stores has demonstrated strong profitability, with an operating margin of 5.63%, ranking better than 61.75% of its industry counterparts. The company's consistent profitability over the past decade underscores its efficient operational model and market position. However, its growth metrics show some concerns, with a 3-year average EBITDA growth rate of 0%, indicating stagnation in earnings before interest, taxes, depreciation, and amortization.
ROIC vs. WACC
A critical assessment of Burlington Stores' value creation capability involves comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). Currently, the ROIC is 6.56%, which is below the WACC of 10.86%, suggesting that the company is not generating adequate returns relative to its capital costs.
Conclusion
In conclusion, Burlington Stores (BURL, Financial) presents a compelling case for investors seeking value. The stock appears modestly undervalued based on the GF Value, indicating potential for price appreciation. While the company's financial strength and profitability are robust, its growth and value creation metrics suggest areas for improvement. For those interested in a deeper dive into Burlington Stores' financial health, the 30-Year Financials offer extensive insights.
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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.
