Cabelas Inc (CAB), Dicks Sporting Goods Inc (DKS): Why This Destination Retailer Will Continue to Shoot Higher

Caveats for Cabela’s

CFO Ralph Castner said growth of same store sales would be stable at 2-3%. Also, he added that the company hopes to refinance at a lower rate some debt issues when they come due in 2015 and 2016. Cabelas Inc (NYSE:CAB) does trade at a higher P/E than Dicks Sporting Goods Inc (NYSE:DKS), 25.33  to 20.57, and Dick’s offers a 1.10% yield. Dicks Sporting Goods Inc (NYSE:DKS) analysts estimate a 5 year EPS growth rate of 15.49%. However, the PEG of Cabela’s is barely higher at 1.16 than Dick’s at 1.07.

Dicks Sporting Goods Inc (NYSE:DKS) has underperformed even the S&P 500, only up 0.15% over 52 weeks.The Street also didn’t like that Dick’s cold weather inventory unsold in the warm holiday period wasn’t available to be sold during January and February. It should come as no surprise that the short interest is high at 11%  with the Livestrong merchandise associated with Lance Armstrong not selling either.

While an association with a cheater is no good for business partnering up with a gun company like Sturm, Ruger is good for business. Cabelas Inc (NYSE:CAB) has been arranging travel events and experiences like visits to the Ruger Gunsite Academy in which Cabela’s Club members tried out limited production firearms, had dinner with the Ruger CEO, and other fun shooting events.

Speaking of Ruger, at a 15.08 P/E and almost a 3.00% yield it’s also an interesting proposition. It is off almost 10% from its 52 week high likely with the gun control measures moving through the Senate but is more reactive to gun control chatter than Cabela’s. Ruger has also outperformed the last year up some 26.46%, but it has a huge short interest of 30%.

Eats, shoots, and leaves

At the end Millner explained the company issued a press release the day before as the quarter was so good in the cause of transparency they had to say something. Millner, ever the gracious host to analysts, joshed with them , “Now I hope you enjoyed today. I don’t want to be in the way of analysts shooting guns and eating…those are 2 dangerous places to be.” (source).

Analysts have all the fun…but seriously, the company is doing so many right things it’s not surprising that there are no underperforms or sells. Buying Cabelas Inc (NYSE:CAB) on a pullback is a good idea. And make way for hungry, gun-totin’ analysts upgrading right and left.

The article Why This Destination Retailer Will Continue to Shoot Higher originally appeared on Fool.com and is written by AnnaLisa Kraft.

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