Hibbett Sports (NASDAQ:HIBB), along with its subsidiaries, retails athletic-inspired fashion products.
The company operates stores in small-to-mid-size communities with a recent focus on digitalization, adding substance to its top-line growth. I am bullish on the stock. (See HIBB stock charts on TipRanks)
Recent Performance
The stock price has shot up by 180% over the past year, mainly due to increased consumer spending and widening profit margins. The company's two-year comparable sales increased by 72.8%, while gross margins increased by 2% year-over-year due to increased premium goods consumption, and an increase in e-commerce volume.
Capital expenditures increased year-over-year by 64.3%, as Hibbett has spent a substantial portion of its cash earned in 2020 on store expansion, relocation, and upgrades. It appears as though 2020's success was pivotal, as it's allowed Hibbett to spend the money required to implement its business-intelligence strategy.
The balance sheet is in good shape, with a current ratio of 2.06, and a Piotroski score of 8, indicating sound liquidity. Hibbett is levered up by 63.55%, but its interest-coverage ratio of 631 blows the lights out. The company will likely take on additional debt to expand even further.
Shareholder Compensation
With an $800-million repurchase plan lasting up to 2025, and a near decade-long downward trajectory in shares outstanding, HIBB's EPS ratio is likely to continue improving going forward.
As well, even though a $0.25 quarterly dividend has been retained, Hibbett investors could potentially experience future dividend hikes.
The argument for dividend hikes stems from its safety ratios. The company has a payout ratio (3.09%) that's 88.56% lower than the sector average. Furthermore, Hibbett has a dividend coverage ratio (13.41) 232.93% better than the sector average.
Valuation
Hibbett holds a substantial amount of relative value, with a P/E ratio of 8.73.
Wall Street thinks the stock is a Strong Buy with four Buy ratings and one Hold rating being placed in the past three months. The average HIBB price target of $112 implies 17% upside potential.
Disclosure: On the date of publication, Steve Gray Booyens had a position in Hibbett, Inc.
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