Dick’s Sporting Goods Inc. (DKS) has been growing steadily for years. But Dick’s isn’t purely a growth stock – it’s also undervalued. DKS shares currently trade at just under 14.3x forward earnings estimates and at 1.3x sales, observes Chris Preston, chief analyst at Cabot Value Investor.
From 2016 to 2023, the sporting goods chain’s revenues improved 64%, from just under $8 billion to just under $13 billion. In 2024, the top line is on track to top $13 billion for the first time. It should top $13.5 billion in 2025.
Dick's Sporting Goods Inc. (DKS)
Dick’s reported earnings earlier this week, and unlike after past earnings reports, the stock did not get an immediate bump. DKS shares, in fact, were down 7.5% in the couple of days since the report. But the results were fine.
The sporting goods store beat Q4 estimates on both the top and bottom lines, with EPS of $3.62 topping the $3.48 estimate, and $3.89 billion in sales ahead of the $3.76 billion expected. Also, same-store sales improved 6.4% in the fourth quarter (its best performance in two and a half years).
So, why the sell-off? Because guidance came in a bit cautious. 2025 sales guidance came in at the low end of estimates, while EPS guidance actually trailed previous expectations. However, the firm’s CEO said it lowered guidance as a precaution to account for tariff uncertainty, something many companies have done in recent weeks.
So, chances are the selling the last couple days was overdone. If the market can get right, I think a swift bounce-back in DKS shares is in order given the strength of Dick’s fourth-quarter results.
Recommended Action: Buy DKS
