Big Lots, Inc. $BIG
1. Is the company undervalued?
EV/EBIT: 16.92 (Please note this excludes operating lease liabilities)
Big Lots trades at an absurd ratio relative to sales, however the company just posted arguably its worst quarter ever. Same store sales were down 17% YOY, inventories increased 48.5% compared to last year, and they lost $11.1M after guiding for a $32.5M profit. This has investors worried that the business model may be broken. Conversely optimists would argue that $BIG is suffering from macro-economic shocks that will subside in due time. If earnings do normalize the stock is no doubt woefully mispriced. There’s certainly some hair on this investment, but where there’s uncertainty there’s also opportunity!
Link full write-up here: