Stock Analysis

Is Now An Opportune Moment To Examine Hibbett, Inc. (NASDAQ:HIBB)?

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NasdaqGS:HIBB
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Hibbett, Inc. (NASDAQ:HIBB), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Hibbett’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Hibbett

What's the opportunity in Hibbett?

Good news, investors! Hibbett is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Hibbett’s ratio of 8.65x is below its peer average of 14.01x, which indicates the stock is trading at a lower price compared to the Specialty Retail industry. However, given that Hibbett’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Hibbett generate?

earnings-and-revenue-growth
NasdaqGS:HIBB Earnings and Revenue Growth July 24th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -17% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Hibbett. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although HIBB is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to HIBB, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on HIBB for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Hibbett as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Hibbett you should know about.

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