08-25-2021, 02:01 PM
(08-25-2021, 01:48 PM)vbin Wrote: PRI looks like a decent buy, DKS projections are negative beyond 2022. What's your theory on dks to start a position now Eric?
DKS just blew earnings completely out of the water, raised the dividend by 21%, announced a $5.50/share (4.2% yield) special dividend, raised 2021 EPS guidance by 50%, and doubled its buyback expectations for 2021 from $200M to $400M. A $400M buyback is ~4% of shares outstanding.
Those numbers and those announcements sound to me like the company isn't expecting growth to slow down. The company has an excellent online presence that I use frequently to buy clothing/shoes for my family, which allowed it to grow earnings by 14% in 2020 despite the pandemic and roughly double its earnings in 2021. It is trading at roughly 10X new guidance for 2020, which is a big discount to historical valuation levels.
TJX has very little online presence, which caused its earnings to drop by 90% in 2021 when it had to close all of its stores down. It trades at 26X 2022 earnings projections, which is 2.5X the multiple of DKS.
Obviously, if 2022 turns out to be negative growth for DKS, this trade probably doesn't work very well. But with back-to-school firing up and the economy continuing to reopen, I think those projections for negative growth going forward will turn out to be too pessimistic.