Don’t look now, but Burlington (BURL) — the company that owns just under 550 Burlington Coat Factories bringing in just under $5 billion in revenue annually — has soared nearly 50% over the past year, even as the S&P 500 has taken investors on a roller coaster ride that is currently dipping its toes in the red.
That’s not to say, however, that it has been smooth sailing for BURL stock, where the steadiest streak of upward momentum came from mid-2014 to early 2015. BURL shares peaked at just over $60 in March before seesawing for months to settle at their current $54 pricetag.
The latest leg of the seesaw was positive, as Burlington Stores reported quarterly results last week, which bested analyst estimates on the top and bottom lines.
Single-day, double-digit gains came as a result of 10% year-over-year sales growth, nearly 6% same-store sales growth (which was far better than the 1% “improvement” Burlington posted in the first quarter) and a 7-cent earnings beat (also far better than the loss posted a year ago).
Toss in raised guidance and higher margins and it seems Burlington has the trappings of a growth story.
BURL Stock Isn’t Quite There
In reality, Burlington is pretty shrug worthy. As a brick-and-mortar retailer (and one without a particularly unique or strong brand), it’s hardly a gamechanger. While there have been promising signs for consumer spending here and there, investors should still focus on the cream of the retail crop.
BURL stock simply does not fit that bill.
This is evidenced partly by the fact that long-term earnings growth is hardly organic, as sales growth is slated to be in the single digits this year and next, while earnings are expected to expand by 18% on a long-term basis.
If you’re going for a retail play, you want a brand that is a leader with growing sales. You don’t want a brand that is struggling to keep its head above water, forced to focus on management and posting big single-day jumps simply because expectations are kind of pathetic.
To that end, disappointing first-quarter numbers are arguably part of the reason the second-quarter numbers seemed so notable. While the company posted an earnings beat, it missed on sales (solidifying the lack of organic growth I just mentioned), while same-store sales, once again, were less than a percent.
Bottom Line on BURL Stock
For the cherry on top, even though BURL stock lost some ground in recent months — thanks in part to disappointing first-quarter earnings and growth — shares still aren’t that great of a value.
The company’s forward price-to-earnings of 20 is a bit frothy compared to the aforementioned long-term growth on tap for the company, hence the price-to-earnings-growth ratio of just under 1.3.
Put it all together, and it’s clear investors shouldn’t go starry-eyed over BURL stock. Despite the impressive past performance — including last week’s solid Q2 earnings jump — there are better places for your money.
As I mentioned earlier this week, when things are rough in the markets, investors should look for value, mega-trends and think long-term. BURL stock doesn’t fit the bill as a pick worth fishing for in rocky waters.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
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