Why Big Lots (BIG) Shares Are Gaining Today

Tickers in this article: BIG

NEW YORK ( TheStreet) --  Big Lots was gaining 2% to $37.96 Monday after KeyBanc upgraded the retailer to "buy" from "hold."

The bank set a price target of $45 for the company. Analyst Bradley B. Thomas wrote that Big Lots is gaining traction on several turn around initiatives thanks to new president and CEO David Campisi.

"Mr. Campisi is implementing an "Edit to Amplify" strategy to improve stores' shoppability for "Jennifer," its core customer," Thomas wrote. "While this strategy is overarching and likely to be the most important earnings lever for BIG in the coming years, our analysis suggests investors receive this effort as a "call option," as several other initiatives have the potential to double earnings on their own. First, BIG is exiting Canada, eliminating its drag on earnings and focusing management's time on the core business. Additionally, BIG plans for continued share repurchases, supported by its strong FCF outlook. The addition of freezers/coolers and expansion of furniture financing are both positioned to drive sales and EPS."

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TheStreet Ratings team rates BIG LOTS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BIG LOTS INC (BIG) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BIG's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 38.24% is the gross profit margin for BIG LOTS INC which we consider to be strong. Regardless of BIG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BIG's net profit margin of 5.15% compares favorably to the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.2%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • BIG LOTS INC's earnings per share declined by 33.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, BIG LOTS INC reported lower earnings of $2.14 versus $2.98 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $2.14).
  • In its most recent trading session, BIG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: BIG Ratings Report

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