BOOT Stock Study (1-26-23)

I recently* did a stock study on Boot Barn Holdings Inc. (BOOT) with a closing price of $74.37.

From M*:

     > Boot Barn Holdings Inc operates specialty retail stores.
     > The company sells western and work-related footwear,
     > apparel, and accessories in the United States. It is a
     > single operating segment, which includes net sales
     > generated from its retail stores and e-commerce websites.

This medium-sized company has grown sales at an annualized rate of 18.5% over the last 10 years and EPS 41.8% per year since ’14. Lines are mostly up, straight, and parallel. PTPM over the last 10 years has risen from 0.6% to 17% (upside outlier) with a last 5-year average (excluding the outlier) of 6.6%. This was below peer (stated as BURL and VSCO) and industry averages until ’20.

ROE has increased from 10.1% in ’14 to 34% in ’21 with the latter appearing to be an upside outlier. The last 5-year average is 18.9%, which seems slightly below (above) industry (peer) averages. Debt-to-Capital has averaged 45.7% over the last five years and was higher than peer and industry averages until 2019. The company has no long-term debt [operating leases], though, and Interest Coverage is over 60.

I assume long-term annualized sales growth of 6% based on the following:

• CNN Business projects 13.3% YOY and 9.5% per year for ’22 and ’21-’23, respectively (based on 12 analysts).
• YF projects YOY 11.8% and 6.8% for ’23 and ’24, respectively (13 analysts).
• Zacks projects YOY 12.2% and 7.6% for ’23 and ’24, respectively (5).
• Value Line projects 7.9% annualized from ’21-’26.
• CFRA projects 11.9% YOY and 13% per year for ’23 and ’22-’24, respectively (13).
• M* gives a 2-year ACE of 8.7% per year.

I assume long-term annualized EPS growth of 5% based on the following:

• CNN Business reports ACE of 7.1% YOY contraction and 1.6% per year contraction for ’22 and ’21-’23, respectively (based on 12 analysts).
• MarketWatch projects annualized ACE of 1.6% contraction and 3.2% growth from ’22-’24 and ’22-’25, respectively (13 analysts).
• Nasdaq.com projects growth of 5.2% YOY and 10% per year for ’24 and ’23-’25, respectively (6, 7, and 2 analysts for ’23, ’24, and ’25).
• YF projects YOY 9.6% contraction and 4.4% growth for ’23 and ’24, respectively, along with 11.9% annualized growth for the next five years (13).
• Zacks projects YOY 6.5% contraction and 4.9% growth for ’23 and ’24, respectively, along with 10.6% annualized growth for the next five years (6).
• Value Line projects annualized growth of 2.9% from ’21-’26.
• CFRA projects 9.6% contraction YOY and 2.9% per year contraction for ’23 and ’22-’24, respectively (13).

My Forecast High P/E is 20. High P/E has ranged from 19.3 (’17) to 93.1 (upside outlier in ’15) since 2014. The last 5-year average is 25.6.

My Forecast Low P/E is 6. Low P/E has ranged from 4.9 (’19) to 31.3 (upside outlier in ’14) since 2014. The last 5-year average is 7.2.

My Low Stock Price Forecast is $36.50. This is the default value and 51% below the previous closing price. While this is more than the 20% rule of thumb, given the earnings contraction projected over the next couple years, I don’t see good reason to override (which would effectively be using a higher Forecast Low P/E).

All this results in an U/D ratio of 2.1, which makes BOOT a Hold. Total Annualized Return is 15.9%.

While the total return projection is impressive, PAR (using forecast average, not High, P/E) is a lukewarm 6.3%. I want more from a medium-sized company.

For added context, I like to assess margin of safety (MOS) by looking to Member Sentiment. Out of 120 studies over the past 90 days, projected sales, projected EPS, High P/E, and Low P/E average 10.7%, 9.8%, 21.9, and 8.5, respectively (two studies excluded with Projected High P/E’s of 100 and 2128, which skewed the average Projected High P/E to 39.8). I’m lower on all inputs. Same goes for the average projected low price of $41.90, which is $5.40 higher than mine.

Finally, Value Line has projected average annual P/E at 17 compared to my 13.

It will suffice to say that the MOS is alive and well in this analysis. I’m a buyer on a stock price below $66.

*—Publishing in arrears as I’ve been doing one stock study per day while usually posting two blogs per week.