DICK’S Sporting Goods, Inc. (NYSE:DKS) isn’t the biggest company on the market, but it has seen significant price action on the NYSE over the past few months, rallying to highs of $118 and falling to lows of $86.83 -Dollar. Some stock price movements may present investors with a better opportunity to get into the stock and potentially buy it at a lower price. One question to answer is does DICK’S Sporting Goods’ current trading price of $89.45 reflect the true value of the mid-cap? Or is it currently undervalued and presenting us with an opportunity to buy? Let’s take a look at DICK’S Sporting Goods’ prospects and value based on the latest financial data to see if there are any catalysts for a price change.
Check out our latest analysis for DICK’S sporting goods
What is DICK’S sporting goods worth?
The stock price looks reasonable right now based on my price multiples model, which compares the company’s price-to-earnings multiples to the industry average. In this case, I used the price-to-earnings (P/E) ratio because there isn’t enough information to reliably predict the stock’s cash flows. I find that DICK’S Sporting Goods’ ratio of 4.81x trades slightly below its industry peers’ ratio of 6.44x, meaning that if you bought DICK’S Sporting Goods today, you would pay a decent price for it. And if you think DICK’S Sporting Goods should trade at this level over the long term, then there isn’t much upside against its peers. However, there might be an opportunity to buy in the future. This is because DICK’S Sporting Goods’ beta (a measure of stock price volatility) is high, meaning its price action will be exaggerated relative to the rest of the market. When the market is down, the company’s shares are likely to fall more than the rest of the market, presenting a prime buying opportunity.
What does the future of DICK’S Sporting Goods look like?
NYSE: DKS Earnings and Sales Growth May 13, 2022
Investors looking for growth in their portfolio should consider a company’s prospects before buying its stock. Buying a great company with a robust outlook at a great price is always a good investment, so let’s also take a look at the company’s future expectations. In the case of DICK’S Sporting Goods, however, it is expected to deliver sharply negative earnings growth over the next few years, which isn’t helping to build its investment thesis. It seems that the risk of future uncertainty is high, at least in the short term.
What this means for you:
Are you a shareholder? DKS is currently priced close to its industry peers, but given the uncertainty surrounding future negative returns, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial to your overall portfolio? And is the opportunity cost of owning a stock with a negative outlook too high? Before you commit to DKS, check to see if the fundamentals have changed.
Are you a potential investor? If you’ve been eyeing DKS for a while now might not be the best time to buy as these are industry price multiples. This means that there are fewer benefits from miss-prices. In addition, the negative growth outlook increases the risk of holding the stock. However, there are other important factors that we didn’t consider today that can help solidify your view on DKS should the price dip below the industry P/E.
Remember that when analyzing a stock, it’s important to consider the risks involved. Note that DICK’S Sporting Goods will be on display 4 warning signs in our investment analysis and 1 of them concerns …
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This Simply Wall St article is of a general nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.