Dick's Sporting Goods reports on earnings before the open tomorrow
Dick's Sporting Goods, Inc., a specialty retailer, will report third quarter earnings prior to the market opening on Tuesday, November 23, DKS traded at $140.89, up 1.6% ahead of the event. This is within a chip shot of record highs, making tomorrow’s price action even more fascinating.
Dick's has a long history of positive after-earnings reactions. Seven of the eight most recent quarterly reports in the past two years have seen a positive post-earnings reaction. These include impressive bull gaps of 13.3% and 16.9% in August, respectively. The options market is pricing in a 13.5% post-earnings movement, which is higher than the 9.9% average return in the past two years regardless of direction.
DKS is deserved a trophy for the outstanding year it had. DKS is up 157% over the past year, just one solid bull gap after earnings from surpassing its Sept. 7, record high of $141.35. The sharpest pullbacks have been contained by the 80-day moving mean.
Dick's Sporting Goods offers a forward dividend, $1.75, with a dividend yield 1.26%. The stock currently trades at a solid price/earnings ratio (11.37) and price-sales ratio (1.18), despite its incredible growth over the past year. Dick's Sporting Goods achieved this by increasing its trailing 12-month revenue 22% and its trailing 12 month net income 136.5% compared to fiscal 2020. Since fiscal 2017, the sporting goods retailer has seen its revenue rise by 36.5% and net income increase by 288%.
Analysts expect a substantial decrease in earnings for Dick's Sporting Goods over the next year. They have placed a forward price/earnings ratio (or 17.76) on Dick's stock. DKS also saw a 2% drop in annual revenues in fiscal 2018, and a 8% decrease in annual net income in fiscal 2017, which raises doubts about Dick's stock valuation.
Despite Dick's Sporting Goods' positive growth rate, it's unlikely its valuation will be sustained in the short term unless DKS significantly exceeds expectations in the next quarters. From a fundamental perspective, Dick's stock remains a promising long term investment.