Get in the game with Academy Sports and Outdoors

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Sports bargains have been strong in recent years – Sports and outdoor academy (ASO) has benefited from the purchase of sports equipment fueled by the pandemic, as more and more people engage in outdoor activities, notes Ian Wyatteditor of Million Dollar Wallet.

The retailer operates 260 stores in 16 states with a concentration in fast-growing regions of the United States such as the Southeast and Texas. Same-store sales are down slightly from last year. That’s because sales skyrocketed in 2021 from the depths of the pandemic.

However, when you look at the total growth over the past two years, it’s impressive. The company’s sales have increased by 35% over the past two years, despite opening only one new store during the period. This demonstrates the tremendous overall growth of Academy stores.

Retail is the daily bread of the business. However, e-commerce sales grew nearly 19% last quarter. Online sales now account for nearly 10% of total sales. And in the past 3 years, the online channel has grown fourfold.

There are fears that a future recession could hurt sales of sporting goods. However, it seems that playing sports and outdoor activities will always be a relatively inexpensive way for children and adults to have fun.

This year, the company expects to generate approximately $6.5 billion in sales. And that should drop $550 million to $615 million in net income, according to management guidelines.

Earnings per share should be around $7 this year and reach $7.64 next year. Eight new stores are planned for this year. Plus another 80-100 stores over the next five years. This translates into an increase of almost 40% in the number of stores.

Academy is on a solid financial footing with over $470 million in cash, or 12% of the company’s market value. And it’s completely debt free.

I always like to invest in stocks that make money for shareholders. During the first quarter, the company returned $95 million in cash to shareholders. This included $88 million in stock buybacks. The board of directors approved a $600 million share buyback plan, in addition to an exceptional $100 million plan.

Share buybacks only make sense if a company’s shares are cheap. The good news is that Academy shares are incredibly cheap. This means the stock is trading at 6x EPS estimates for the current year. The multiple of the price at sales is miniscule at 0.5 times. Now is an attractive time to enter the stock.

The combination of cheap valuation and future growth is a winning combination. This is exactly the type of value stock I want to own. I expect to build a position and hold this stock for 3-5 years as we watch management execute their plan.

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