Dick’s Sporting Goods (DKS) has risen about 45% from its November low of $23.88. Fellow SA contributor Josh Arnold made a bull case for the stock with the article, Dick’s Sporting Goods: A Cheap Valuation And Strong Yield. Josh is a prolific author who routinely makes some great calls on stocks from many different sectors. But on this pick, I lay out a rebuttal thesis and why the secular changes in the economy are going to make any current value analyses a difficult argument to embrace.
The main thesis of the bull case is that, although comps are low (negative), the company is buying back some shares, opening a few more stores, and sports a decent 3% yield. With flat revenue growth, their EPS can still climb with a reduced share count while we await a turnaround.
The temptation with stocks is to always assign some ratios, or value metrics, and then dig in our heels and mock the market's lack of understanding of our enlightened position. I tend to look at things a little differently than most people, for better or worse. If investing was as simple as this, accountants would be the best stock pickers on Earth.
