Over the past six months, Ollie's has been a great trade, beating the S&P 500 by 22.1%. Its stock price has climbed to $135.17, representing a healthy 27.1% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy OLLI? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does Ollie's Spark Debate?
Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ: OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.
Two Positive Attributes:
1. New Stores Opening at Breakneck Speed
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
Ollie's sported 584 locations in the latest quarter. Over the last two years, it has opened new stores at a rapid clip by averaging 9.2% annual growth, among the fastest in the consumer retail sector. This gives it a chance to scale into a mid-sized business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
2. Surging Same-Store Sales Show Increasing Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Ollie’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 4.1% per year.
One Reason to be Careful:
Fewer Distribution Channels Limit its Ceiling
With $2.34 billion in revenue over the past 12 months, Ollie's is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.
Final Judgment
Ollie's has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 34.8× forward P/E (or $135.17 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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