Buckle Inc (NYSE: BKE) investors have enjoyed seeing the stock price increase by 15.6% over the last month. As a small-cap stock, hardly covered by analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.
Is Buckle Still Cheap?
Good news, value investors! Buckle is still a bargain right now. According to the valuation below, the intrinsic value for the stock is $26.39, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$27.48||22.7%|
|5-yr DCF Revenue Exit||$24.44||9.1%|
|Peer Revenue Multiples||$20.89||-6.8%|
|10-yr DCF EBITDA Exit||$31.02||38.5%|
|5-yr DCF EBITDA Exit||$29.49||31.6%|
|Peer EBITDA Multiples||$31.40||40.2%|
|10-yr DCF Growth Exit||$33.36||48.9%|
|5-yr DCF Growth Exit||$32.82||46.5%|
|Peer P/E Multiples||$31.28||39.7%|
|Dividend Discount Model||$10.56||-52.9%|
|Dividend Discount Model (multi-stage)||$17.56||-21.6%|
Click on any of the analyses above to view the latest model with real-time data.
Buckle’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta of 0.67. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What Does The Future Of Buckle Look Like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.
source: finbox.io data explorer
Buckle’s revenue growth is expected to average -1.5% over the next five fiscal years indicating that the core business could be in real trouble. In fact, this could imply that its products or services are losing demand and/or becoming irrelevant.
How This Impacts You
Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:
“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”
While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value.
Although Buckle’s future growth is relatively low, the company’s stock still appears to be trading at a discount to its intrinsic value. Therefore, it may be a great time to purchase shares or add more to your existing holdings.
But before making an investment decision, I recommend you continue to research Buckle to get a more comprehensive view of the company by looking at:
Risk Metrics: how much interest coverage does Buckle have? This is a ratio used to assess a firm’s ability to pay interest expenses based on operating profits (EBIT). View the company’s interest coverage here.
Valuation Metrics: what is Buckle’s short ratio and how does it compare to its publicly traded peers? It represents the percentage of total shares outstanding that is being shorted. View the short ratio here.
Efficiency Metrics: fixed asset turnover is calculated by dividing revenue by average fixed assets. View Buckle’s fixed asset turnover here.
Author: Andy Pai
Expertise: financial modeling, mergers & acquisitions
Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:
- Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
- Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets.
Andy can be reached at firstname.lastname@example.org.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.