With a striking daily gain of 20.74% and a contrasting three-month performance showing a loss of -3.14%, Burlington Stores Inc (BURL, Financial) presents an intriguing case for investors. A key metric underpinning this examination is the company's Earnings Per Share (EPS) which stands at 4.06. The burning question we explore is whether Burlington Stores is significantly undervalued in the market. As we delve into the valuation analysis, we invite readers to consider the compelling evidence that follows.
Company Introduction
Burlington Stores Inc (BURL, Financial), the third-largest American off-price apparel and home fashion retail firm, operates 927 stores and offers a vast assortment of products from over 5,000 brands. With an everyday-low-price approach, they undercut conventional retailers' prices by up to 60%. The company's focus on a treasure-hunt shopping experience with a rapidly changing merchandise array in a low-frills environment has defined its market niche. The stock's current price of $165.06, with a market cap of $10.70 billion, stands in contrast to the GF Value of $242.64, suggesting a significant undervaluation. This discrepancy sets the stage for a deeper dive into the intrinsic value of Burlington Stores.
Summarize GF Value
The GF Value is a proprietary measure that reflects the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line suggests the fair trading range for the stock. When the stock price is significantly below this line, as is the case with Burlington Stores Inc (BURL, Financial), it indicates potential for higher future returns. Currently, the company's stock price suggests that it is significantly undervalued, which could signal a promising long-term investment opportunity.
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Financial Strength
Investing in companies with robust financial strength is crucial to minimize the risk of capital loss. A company's cash-to-debt ratio and interest coverage can provide valuable insights into its financial health. Burlington Stores' cash-to-debt ratio of 0.11 places it in a less favorable position than 79.89% of its peers in the Retail - Cyclical industry. With a financial strength rating of 5 out of 10, Burlington Stores demonstrates fair financial stability, though investors should remain mindful of its debt levels relative to cash on hand.
Profitability and Growth
Consistent profitability is a hallmark of a less risky investment. Burlington Stores has maintained profitability for 9 out of the past 10 years, showcasing a solid track record. With an operating margin of 4.98%, the company ranks favorably within its industry, reflecting strong profitability. However, growth prospects should not be overlooked. Burlington Stores' 3-year average annual revenue growth rate of 6.8% is commendable, yet its EBITDA growth rate of -7.9% suggests challenges ahead, potentially impacting long-term valuation.
ROIC vs. WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) offers insight into a company's value creation efficiency. Burlington Stores' ROIC of 5.73 is currently below its WACC of 8.89, suggesting that the company may not be generating sufficient returns on its investments. This could be a concern for value creation and should be considered by potential investors.
Conclusion
In summary, Burlington Stores Inc (BURL, Financial) appears to be significantly undervalued based on its current market price relative to the GF Value. The company exhibits a fair financial condition and robust profitability. However, its growth ranking and the ROIC versus WACC comparison raise important considerations for the future. For those interested in a more detailed financial analysis, Burlington Stores' 30-Year Financials are available here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
