Discount retail outlets are growing in popularity and that can make them smart options for stock investors. When it comes to discount chains, these companies not only offer the same retail products at bargain prices, but they could also be a bargain addition to any stock portfolio.
Big Lots Is a Hold
The first stock on the list is Big Lots (NYSE: BIG). While the stock currently has a Hold rating, it is definitely worth watching. At $17.88, the stock is definitely a bargain but its -1.4% downside—and guidance lowered to $17.77—is cause for a little caution.
In addition, a dividend yield of 6.6% is certainly attractive but dividend strength is weak. And while the annual dividend amount is a modest $1.20, the dividend payout ratio is -22.94%. Perhaps this will change by the next dividend payout date, which is Dec 28, 2022.
Big Lots also has negative earnings, which would typically trigger a retreat, but they expect to make up a lot of ground by growing earnings from -$4.87 to a projected amount of -$0.19 by their next earnings report. It is expected to be released on March 1, 2023. But the current -$2.28 Earnings Per Share (EPS) may not seem like much but it did beat the most recent earnings estimate by $0.11. Although today's EPS beat the estimate, it is still significantly lower than last year's $1.09 EPS.
In all, it is important to recognize that BIG share value is near the very bottom of its 52-week range ($15.16), dragging the stock down around 60% in both YTD and 1-yr metrics. Still, the stock has bounced back 2.73% since early November. Overall, then, the unbalanced measures warrant BIG's Hold rating.
Ollie's Bargain Outlet May be the Best Overall Bargain
Comfortably growing into the upper half of its 52-week range, Ollie's Bargain Outlet (NASDAQ: OLLI) is currently a Moderate Buy. And at a price of $57.35, the stock could be considered quite the value. Its $62.87 price target could represent an upside of 8.7% but where the stock really shines is the 49.44% projected earnings growth.
Observing OLLI's performance metrics these impressive projected earnings seem feasible. The stock is up 13.44% on the month, 15.76% YTD, and 18.54% from the same period a year ago. Like many others, though, OLLI missed its most recent EPS estimate, but while it is down more than 50% from the same period last year, Q3 2021 earnings were only $0.52.
The next reporting date is Dec 7, so there could be a lot of movement very soon for OLLI stock.
Dollarama Has Price and Growth Appeal
Canada-based Dollarama (OTCMKTS: DLMAF) is a more comfortable bet, right now, with a Moderate Buy; and at a current share price of $62.28, it is not a terribly high-cost investment. Of course, its current price target is $85.35, representing a potential upside of 37%. from its last earnings report. This means it may not take long to see a fair return. And since the stock is also currently sitting in the top 10% of its 52-week range, any growth it does have could set a new high.
If that is not enough to garner some consideration for DLMAF, it should be noted that it is celebrating gains in many metrics. While analysts believe Dollarama will see same-store sales growth well into the next year, in a general sense, the stock is up at least 5.5% over the last 30 days and nearly 2% for the quarter. More importantly, perhaps, the stock is up 24.36% YTD and nearly 43% on the year.
While this stock has consistently fallen back down after peaking (once in early 2018 and again in late 2019), its current climb continues to set a new high and it shows no sign of stopping. In fact, its 52-week high ($64.21) is the stock's all-time high as well.
Five Below Is Down YTD but Climbing
With a healthy short interest and a moderate Buy rating, Five Below (NASDAQ: FIVE) is another discount chain that could be a bargain. While the stock is currently sitting comfortably in the top 70% of its 52-week range, it also has an alarmingly high Price-to-Earnings Ratio. Indeed, a P/E of 44.54 means FIVE shares may not be worth their less-competitive price of $183.36, at least for the time being.
An upside of only 1% definitely does not make for exciting news but the stock's value is already above its next price target of $181.89, so there could be a lot of positive momentum moving forward. After all, the stock is about halfway through the quarter, and its last earnings report missed the consensus by only $0.03.
With that in mind, however, FIVE's history suggests that this stock's activity is pretty cyclical, So while the value is very low right now, earnings are expected to jump up, again, by Q4 of 2022, by as much as 19.83%. This could make the stock worth its slightly higher price point, especially at a time when so many others are struggling to find growth.