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Is BURL Stock a Buy, Hold or Sell at a P/E Multiple of 28.6x?
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Burlington Stores, Inc. (BURL - Free Report) is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 28.54, slightly above its historical median of 27.85 over the past year, but still at a modest discount to the industry average of 29.75. This blend of higher valuation relative to its historical benchmark, yet undervalued compared to peers, presents a potential opportunity for investors seeking growth at a reasonable price while the market remains cautiously optimistic.
Image Source: Zacks Investment Research
Over the past three months, BURL shares gained 5.7%, outpacing the industry’s growth of 2.5%. The stock has also outperformed the S&P 500 index, which grew 5.3% during the same period.
Image Source: Zacks Investment Research
But is only a favorable valuation enough to justify buying the stock?
BURL Expansion Strategy Bodes Well for Long-Term Growth
Burlington Stores is positioned for growth, backed by strong fundamentals and strategic initiatives. The company’s aggressive expansion plan, robust comparable sales growth and improving margins are all contributing factors that signal potential upside for the stock. With key drivers in place, Burlington is setting the stage for continued financial success, making it a compelling investment opportunity.
Store expansion has been a cornerstone of Burlington’s growth strategy, significantly contributing to its revenue increase and expanding its market presence across the United States. As part of this strategy, Burlington plans to open 100 net new stores and relocate 30 more by the end of fiscal 2024. Sales of the new stores are exceeding the company's expectations, which typically target about $7 million in sales for the first full year of operation. The company’s ability to consistently grow its footprint and capitalize on high-performing new locations positions it well for sustained future growth.
Burlington Stores has been witnessing decent comparable sales growth. The metric rose 5% during the second quarter. This strong growth comes despite new store cannibalization and showcases BURL’s ability to execute its merchandising and customer engagement strategies efficiently. Full-price selling, up 7%, has allowed the company to reduce markdowns, helping to improve margins. By focusing on delivering value to consumers through higher-margin products, Burlington Stores has been able to improve profitability.
Burlington Stores’ focus on operational efficiency in its supply chain has played a pivotal role in improving margins. The company has implemented steps to streamline its distribution centers, reducing costs while boosting productivity. These efficiencies led to a 160 basis point improvement in operating margin in the second quarter. Burlington Stores’ investments in automation and infrastructure, including plans for a new distribution center, will likely continue to support long-term margin expansion and operational leverage.
What to Expect From BURL in FY24?
Burlington Stores’ revised projections for fiscal 2024 indicate a more optimistic outlook compared with previous estimates. For fiscal 2024, the company envisions total sales to rise 9-10%, up from the previously mentioned 8-10%. Comparable store sales are projected to grow 2-3%, an improvement from the earlier stated 0-2%.
In terms of profitability, the adjusted EBIT margin is projected to increase in the range of 50-70 bps, which is slightly more favorable than the previous estimated range of 40-60 bps. The forecast for adjusted EPS (earnings per share) has also been revised upward and is now expected to be in the range of $7.66-$7.96 compared with the earlier estimate of $7.35-$7.75. This indicates stronger overall profitability.
Reflecting optimism around BURL, analysts have revised their EPS estimates upward. Over the past 60 days, analysts have increased their current and next fiscal year estimates by 2.7% to $7.91 and 2.7% to $9.55 per share, respectively. These estimates indicate expected year-over-year growth rates of around 10.1% and 10.2%, respectively.
Burlington Stores presents a compelling investment case, driven by a combination of its undervalued position relative to industry peers and strong growth fundamentals. While its forward P/E ratio suggests potential undervaluation, the company's aggressive store expansion, solid comparable sales growth and focus on operational efficiencies are key factors poised to drive future profitability. With robust strategies in place to enhance margins and scale revenues, Burlington is well-positioned for sustained long-term growth, making it a stock worth considering for investors seeking opportunities in the retail sector. The company currently holds a Zacks Rank #2 (Buy).
Three Picks You Can’t-Miss
We have highlighted three other top-ranked stocks in the broader sector, namely Abercrombie & Fitch Co. (ANF - Free Report) , Costco Wholesale Corporation (COST - Free Report) and Ross Stores (ROST - Free Report) .
The Zacks Consensus Estimate for ANF’s current financial-year sales and earnings indicates growth of 13% and 63.4%, respectively, from the year-ago reported figures. Abercrombie has a trailing four-quarter earnings surprise of 27.9%, on average.
Costco Wholesale Corporation, which operates membership warehouses, currently carries a Zacks Rank #2. COST has a trailing four-quarter earnings surprise of 2.02%, on average.
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings suggests growth of around 7.4% and 10.1%, respectively, from the year-ago reported numbers.
Ross Stores (ROST - Free Report) ,,one of the largest off-price apparel and home fashion chains, currently carries a Zacks Rank #2. ROST has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings calls for growth of around 4.3% and 11.5%, respectively, from the year-ago reported numbers.
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Is BURL Stock a Buy, Hold or Sell at a P/E Multiple of 28.6x?
Burlington Stores, Inc. (BURL - Free Report) is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 28.54, slightly above its historical median of 27.85 over the past year, but still at a modest discount to the industry average of 29.75. This blend of higher valuation relative to its historical benchmark, yet undervalued compared to peers, presents a potential opportunity for investors seeking growth at a reasonable price while the market remains cautiously optimistic.
Image Source: Zacks Investment Research
Over the past three months, BURL shares gained 5.7%, outpacing the industry’s growth of 2.5%. The stock has also outperformed the S&P 500 index, which grew 5.3% during the same period.
Image Source: Zacks Investment Research
But is only a favorable valuation enough to justify buying the stock?
BURL Expansion Strategy Bodes Well for Long-Term Growth
Burlington Stores is positioned for growth, backed by strong fundamentals and strategic initiatives. The company’s aggressive expansion plan, robust comparable sales growth and improving margins are all contributing factors that signal potential upside for the stock. With key drivers in place, Burlington is setting the stage for continued financial success, making it a compelling investment opportunity.
Store expansion has been a cornerstone of Burlington’s growth strategy, significantly contributing to its revenue increase and expanding its market presence across the United States. As part of this strategy, Burlington plans to open 100 net new stores and relocate 30 more by the end of fiscal 2024. Sales of the new stores are exceeding the company's expectations, which typically target about $7 million in sales for the first full year of operation. The company’s ability to consistently grow its footprint and capitalize on high-performing new locations positions it well for sustained future growth.
Burlington Stores has been witnessing decent comparable sales growth. The metric rose 5% during the second quarter. This strong growth comes despite new store cannibalization and showcases BURL’s ability to execute its merchandising and customer engagement strategies efficiently. Full-price selling, up 7%, has allowed the company to reduce markdowns, helping to improve margins. By focusing on delivering value to consumers through higher-margin products, Burlington Stores has been able to improve profitability.
Burlington Stores’ focus on operational efficiency in its supply chain has played a pivotal role in improving margins. The company has implemented steps to streamline its distribution centers, reducing costs while boosting productivity. These efficiencies led to a 160 basis point improvement in operating margin in the second quarter. Burlington Stores’ investments in automation and infrastructure, including plans for a new distribution center, will likely continue to support long-term margin expansion and operational leverage.
What to Expect From BURL in FY24?
Burlington Stores’ revised projections for fiscal 2024 indicate a more optimistic outlook compared with previous estimates. For fiscal 2024, the company envisions total sales to rise 9-10%, up from the previously mentioned 8-10%. Comparable store sales are projected to grow 2-3%, an improvement from the earlier stated 0-2%.
In terms of profitability, the adjusted EBIT margin is projected to increase in the range of 50-70 bps, which is slightly more favorable than the previous estimated range of 40-60 bps. The forecast for adjusted EPS (earnings per share) has also been revised upward and is now expected to be in the range of $7.66-$7.96 compared with the earlier estimate of $7.35-$7.75. This indicates stronger overall profitability.
Reflecting optimism around BURL, analysts have revised their EPS estimates upward. Over the past 60 days, analysts have increased their current and next fiscal year estimates by 2.7% to $7.91 and 2.7% to $9.55 per share, respectively. These estimates indicate expected year-over-year growth rates of around 10.1% and 10.2%, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
How Should Investors Approach BURL Stock?
Burlington Stores presents a compelling investment case, driven by a combination of its undervalued position relative to industry peers and strong growth fundamentals. While its forward P/E ratio suggests potential undervaluation, the company's aggressive store expansion, solid comparable sales growth and focus on operational efficiencies are key factors poised to drive future profitability. With robust strategies in place to enhance margins and scale revenues, Burlington is well-positioned for sustained long-term growth, making it a stock worth considering for investors seeking opportunities in the retail sector. The company currently holds a Zacks Rank #2 (Buy).
Three Picks You Can’t-Miss
We have highlighted three other top-ranked stocks in the broader sector, namely Abercrombie & Fitch Co. (ANF - Free Report) , Costco Wholesale Corporation (COST - Free Report) and Ross Stores (ROST - Free Report) .
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s current financial-year sales and earnings indicates growth of 13% and 63.4%, respectively, from the year-ago reported figures. Abercrombie has a trailing four-quarter earnings surprise of 27.9%, on average.
Costco Wholesale Corporation, which operates membership warehouses, currently carries a Zacks Rank #2. COST has a trailing four-quarter earnings surprise of 2.02%, on average.
The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings suggests growth of around 7.4% and 10.1%, respectively, from the year-ago reported numbers.
Ross Stores (ROST - Free Report) ,,one of the largest off-price apparel and home fashion chains, currently carries a Zacks Rank #2. ROST has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings calls for growth of around 4.3% and 11.5%, respectively, from the year-ago reported numbers.