Stock Analysis

Why Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) Could Be Worth Watching

NasdaqGM:OLLI
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While Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) might not be the most widely known stock at the moment, it led the NASDAQGM gainers with a relatively large price hike in the past couple of weeks. 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.

See our latest analysis for Ollie's Bargain Outlet Holdings

Is Ollie's Bargain Outlet Holdings Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 40.71x is currently trading slightly above its industry peers’ ratio of 38.2x, which means if you buy Ollie's Bargain Outlet Holdings today, you’d be paying a relatively reasonable price for it. And if you believe that Ollie's Bargain Outlet Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Ollie's Bargain Outlet Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

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

earnings-and-revenue-growth
NasdaqGM:OLLI Earnings and Revenue Growth May 9th 2023

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. With profit expected to grow by 80% over the next couple of years, the future seems bright 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 financial strength of the company. 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 optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for OLLI, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for Ollie's Bargain Outlet Holdings and we think they deserve your attention.

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.

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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.