Stock Analysis

At US$51.19, Is It Time To Put Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) On Your Watch List?

NasdaqGM:OLLI
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Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NASDAQGM over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Ollie's Bargain Outlet Holdings’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Ollie's Bargain Outlet Holdings

What's the opportunity in Ollie's Bargain Outlet Holdings?

The share price seems sensible at the moment according to my price multiple model, where I compare 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 Ollie's Bargain Outlet Holdings’s ratio of 18.78x is trading in-line with its industry peers’ ratio, which means if you buy Ollie's Bargain Outlet Holdings today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Ollie's Bargain Outlet Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Ollie's Bargain Outlet Holdings look like?

earnings-and-revenue-growth
NasdaqGM:OLLI Earnings and Revenue Growth January 3rd 2022

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for Ollie's Bargain Outlet Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in OLLI’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at OLLI? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on OLLI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for OLLI, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Ollie's Bargain Outlet Holdings at this point in time. In terms of investment risks, we've identified 1 warning sign with Ollie's Bargain Outlet Holdings, and understanding this should be part of your investment process.

If you are no longer interested in Ollie's Bargain Outlet Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Valuation is complex, but we're helping make it simple.

Find out whether Ollie's Bargain Outlet Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.