Stock (Symbol) |
Ollie’s Bargain Outlet (OLLI) |
Stock Price |
$57 |
Sector |
| Retail & Travel |
Data is as of |
| January 30, 2018 |
Expected to Report |
| Mar 1 |
Company Description |
Sharek’s Take |
 Ollie’s Bargain Outlet (OLLI) has been a superb stock the past few years. And with profit growth expected to accelerate from the 25-29% range to the 30-35% range, the stock should continue to be a leader in 2018. Ollie’s delivers a treasure-hunt shopping experience in offering closeout products bought at a discount and then selling them for 20-70% off retail and still making a healthy 15% pre-tax profit. The company was founded in 1982 in Pennsylvania but didn’t go public until July 2015 (at $16 a share). Since 2011 the company has gone from 100 stores to 234 and has a total opportunity of 950 in the US. New stores cost $1,000,000 to build, do $3,700,000 in sales the first year and deliver pre-tax profit (EBITA) of around $550,000. From 2011 to 2015 OLLI grew sales and profits 18% a year, then the profit growth rate accelerated after OLLI’s IPO and are currently growing at a high-twenty percent rate. OLLI stock is better than it seems. But savvy investors know this (the company has never lost money on a single store), thus OLLI has had a premium P/E in prior qtrs. But now with profits expected to climb 32%, 33% and 32% the first three qtrs of 2018, a P/E of 35 is very reasonable for this stock. The company Chairman, CEO and President Mark Butler says he’s never seen a better environment in his 35 years, thus I feel OLLI stock will continue on its trend higher. |
One Year Chart |
 29% profit growth for the 2nd straight qtr, but OLLI missed estimates by a penny. That was the first miss I’ve seen from this company. Same store sales rose 2% which wasn’t great. 2018 estimates rose from $1.43 to $1.60. That’s a big jump! Qtrly profit Estimates are 26%, 32%, 33% and 32%. OLLI had beaten the street every qtr since its IPO (before last qtr’s miss). Solid Est. LTG of 25% a year. |
Fair Value |
 My Fair Value has been too low on OLLI (2015-2016) and perhaps my current Fair Value of 37x earnings is too low. Perhaps 40x is more appropriate. Since 2018 estimates have risen from $1.32 to $1.60 the last 4 qtrs, it’s conceivable OLLI could earn $2 this year and a 40 P/E would get this stock to $80. |
Bottom Line |
 Ollie’s Bargain Outlet provides good bargains to consumers, and its business model continues to thrive regardless of competition from the Internet. So no Amazon worries here. Business is brisk and by the way profit estimates look, results could be getting better in the coming qtrs. OLLI ranks 20th in the Growth Portfolio Power Rankings. I’ll look to add it to the Aggressive Growth Portfolio on a dip. |
Power Rankings |
Growth Stock Portfolio
20 of 39Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
