DICK'S Sporting Goods (NYSE: DKS)

Quality Value Investing Research Report | $DKS Updated Coverage | August 2024

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When referencing this research report, premium subscribers can access the Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide. Unless noted, all data presented is sourced from Charles Schwab & Co. as of the market close on August 12, 2024, and intended for illustration only.

In this updated coverage research report, we’ll reexamine the QVI Stock Picks Real-Time consumer discretionary sector holding, DICK’S Sporting Goods ($DKS), to see if it continues to meet Quality Value Investing’s criteria based on our checklist analysis of the business’s current wealth and the share price’s present value.

DICK’S Sporting Goods | Current Wealth

Value Proposition

DICK’S Sporting Goods DKS 0.00%↑ is a dividend-paying mid-cap stock in the consumer discretionary sector’s specialty retail industry. It was added to the QVI Real-Time Stock Picks on January 22, 2019, at $28.21 cost basis per share, adjusted for dividends.

DICK'S Sporting Goods, Inc., together with its subsidiaries, operates as an omni-channel sporting goods retailer primarily in the United States. The company was incorporated in 1948 and is based in Coraopolis, Pennsylvania, USA.

Economic Moat

Morningstar assigns DICK’S Sporting Goods a none moat rating, downgraded from a narrow rating, weighted toward its lack of cost-based advantages over its competitors.

QVI’s Value Proposition Elevator Pitch for DKS:

DICK’S Sporting Goods is the primary sporting goods retailer in its local markets and often the only game in town.

QVI’s value proposition rating for DICK’S Sporting Goods: Neutral.

Returns on Management

Revenue Growth and Net Profit Margin

Per the table below, DICK’S Sporting Goods’ trailing three-year annualized revenue growth was lower-double-digit positive but underperformed the S&P 500 topline growth of 18.50%. However, the company’s revenue growth was +5.20%, which aligned with the broader market’s 4.50% for the most recently reported twelve months.

Further down the income statement, DICK’S had a higher-single-digit positive net profit margin from a 35.00% gross margin, underperforming the S&P 500’s 11.10% net from a 40.70% gross.

Returns on Equity and Invested Capital

DICK’S senior management produced a high-double-digit return on equity, or ROE, double QVI’s targeted threshold and the S&P 500’s ROE of 18.60%.

Stock buyback programs often elevate ROE. For example, in 2021, DICKS’S board of directors authorized the repurchase of up to $2 billion of its outstanding shares. As of 2024, the company repurchased $1.35 billion of outstanding shares at an average price of $108.93, with $665 million of that authorization remaining. (Source: DICK’S Sporting Goods). Based on this writing’s closing stock price of $204.50, the comapny has exercised share buybacks at value prices on behalf of shareholders.

DICK’S return on invested capital, or ROIC, was above QVI’s threshold but lagging the broader market’s 21.30% return. In addition, DICK’S ROIC exceeded its weighted average cost of capital, or WACC, demonstrating that its senior executives are adequate capital allocators. (Source of WACC: GuruFocus)

QVI’s business fundamentals rating for DICK’S Sporting Goods: Bullish.

Next, we’ll look at the company’s returns on management table, its enterprise downsize risks, the stock price’s present value, share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.

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Disclosure: At this writing, I/we had no beneficial position in DKS common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.

Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in independent research or due diligence and consider, as appropriate, consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.

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