On Monday, BofA Securities resumed coverage of Ollie's Bargain Outlet (NASDAQ:OLLI), assigning the stock a Buy rating with a new price target set at $92. The firm positions Ollie's favorably in the retail sector due to its ability to offer less discretionary products at significantly lower prices, ranging from 20-70% below those of its competitors.
Ollie's Bargain Outlet is recognized for its consistent performance, delivering double-digit sales and EBITDA growth. BofA Securities anticipates that Ollie's continued achievement of these targets could drive an expansion of its current 22x forward year 2025 price-to-earnings (P/E) multiple.
The price objective of $92 is grounded in a 26x forward year 2025 earnings per share (EPS), aligning with the firm's valuation of other off-price retailers such as TJX Companies (NYSE:TJX) and Ross Stores (NASDAQ:ROST). This valuation reflects Ollie's robust sales growth and a comparable long-duration margin profile. However, it also accounts for the company's higher exposure to the unpredictability of closeout inventory.
BofA Securities forecasts a 10% compound annual growth rate (CAGR) in sales and EPS over a three-year period through fiscal year 2026, which is consistent with the consensus. This projection is based on an assumption of 2% annual comparable store sales and high single-digit unit growth.
InvestingPro Insights
According to InvestingPro data, Ollie's Bargain Outlet (NASDAQ:OLLI) is currently trading with a market capitalization of approximately $4.86 billion and a P/E ratio of 25.52. This valuation is in line with the company's near-term earnings growth, as Ollie's P/E ratio is relatively low compared to its growth, with a PEG ratio of just 0.33 for the last twelve months as of Q4 2024. The company's revenue has seen a robust increase of 15.09% during the same period, signaling a strong performance in the retail sector.
InvestingPro Tips highlight that Ollie's operates with a moderate level of debt and has liquid assets that exceed its short-term obligations, which may contribute to its financial stability. Additionally, analysts predict that the company will remain profitable this year, which is supported by a history of profitability over the last twelve months and a high return over the last decade. It's important to note that Ollie's does not pay a dividend, which could be a factor for investors who prioritize income generation through dividends.
For readers looking to delve deeper into Ollie's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/OLLI. To access these tips and more detailed analytics, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are a total of 7 InvestingPro Tips available for Ollie's Bargain Outlet, which can provide further insights into making informed investment decisions.
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