Big 5 Sporting Goods Corporation (BGFV), Dicks Sporting Goods Inc (DKS), Cabelas Inc (CAB): Are These Three Sports & Outdoors Retailers Good Investment?

A company with strong presence in outdoors

Cabelas Inc (NYSE:CAB) leads in the hunting, fishing, camping, and related outdoor merchandise retail and direct marketing segment. Although it offers the highest expected average annual growth rate among the three firms at 17%, it also trades at the highest valuation, at 25.1 times its earnings and 1.5 times its sales. Nevertheless, I believe that Cabelas Inc (NYSE:CAB) is still a buy case due to its long-term growth prospects provided by its multi-channel approach to sales, its diversified business model, and its revamping initiatives for the years to come alongside.

Despite owning under 40 stores in North America, each of them is unique and attractive, offering a complete experience not only in the hunting and camping equipment, but also in the dining segment. Its strong presence in the online arena has driven hundreds of customers to these authentic stores and will most likely continue doing so. Its next generation stores are even more productive and require less capital investments; the company targets to open 15 new stores of this kind in both the U.S. and Canada before the end of 2014.

Last quarter’s results portray an encouraging outlook. Same store sales grew in almost every segment, from guns to optics. Earnings also rose considerably, to $0.70 per diluted share, up 75% year over year. As stated above, its multi-channel retail strategy helps it derive revenue from various sources and attract customers from diverse locations.

Alongside attractive store retail revenue, direct revenue (derived mainly from its website sales) rose 18.4%, year over year, last quarter. Operating, net, and gross margins also rose, reaching industry leading values of 9.4%, 5.9%, and 35.6% respectively.

Bottom line

As stated in the introduction, these three companies trade well below industry average valuations while offering above average expected annual growth rates. Poised to outperform the market, I’d recommend adding these three stocks to your portfolio.