BGFV - From Community Call Outs

internetkings · March 31, 2022, 3:14pm

There seemed to be some interest in this - So I thought I would make a thread.

I only copied and pasted it all - The_Ni is the OP. Sorry about any formatting errors - quick search for BGFV and click community callouts to see the originals.

By @The_Ni 3/28 3/29 ish

Got 10.5C Jan 2023 BGFV LEAPS for $9. Current price $18.84.

BGFV is inching up again. Crossed the 50day SMA. Decent company , heavily shorted - 41% of the 20M FF. With markets generally feeling good, this could drift up and then spike. Even if doesn’t spike, Jan 2023 gives a bit of runway to let the drift happen.

TheMadBeaker Verified

2d

That spike back in Nov was for earnings and I think a caddude or sirjackalot yolo on reddit.

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thots_and_prayersLegend

Yep that was it

The_NiVerified

Fair point, to clarify, the conviction is mostly based on the underlying strength of the business, with the possibility of another squeeze as gravy, in case the meme world takes it on.

Annual revenue is > $1B and steady. Net income is > $100M, and FCF is ~$100M (Financials). Yet the market cap is, inexplicably, $370M. Now that prices have started to move up, hoping it inches closer to fairer value, despite price suppression from shorts.

This is the kind of valuation/marketcap that also makes similar companies a PE target - like Stamp and Cerner.

Realizing should probably write up a DD post on this since BGFV has history and has a few moving parts; will do so later today

The_NiVerified

TheMadBeaker

2d

Fair point, to clarify, the conviction is mostly based on the underlying strength of the business, with the possibility of another squeeze as gravy, in case the meme world takes it on.

Annual revenue is > $1B and steady. Net income is > $100M, and FCF is ~$100M (Financials). Yet the market cap is, inexplicably, $370M. Now that prices have started to move up, hoping it inches closer to fairer value, despite price suppression from shorts.

This is the kind of valuation/marketcap that also makes similar companies a PE target - like Stamp and Cerner.

Realizing should probably write up a DD post on this since BGFV has history and has a few moving parts; will do so later today

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internetkingsVerified

Is there any expectation of a large dividend payment again from them?

The_NiVerified

Delayed BGFV callout - 7/15 20C limit buy filled; had set this earlier after seeing Conqueror’s buys for the Challenge portfolio. This is in addition to the LEAPS I got earlier.

Part of the driver for the rise today is good earnings from ASO, which is sort of a comparable.

And @internetkings, no idea about another large dividend payment, but wouldn’t put it past them. Earnings are 5/2, so we’ll know soon. Thanks for noting this, will keep an eye out for it.

ImTiller · March 31, 2022, 3:31pm

Adding to this a little bit. As pointed out already, BGFV has had a few spikes in the past whether it related to meme movements or not. My opinion is that these option prices combined with how far the expiration dates are is pretty damn good for a company with solid underlying fundamentals and “memeability”. Coupling this with the very good chance that the price range the stock currently sits at being its floor, made me take a few of the Jul 15 20c’s.

I’d like to see a solid bear case on BGFV, I’ve been alerted of this play before previous spikes by @T_Milly and never took a position. I can’t really think of one other than general market volatility bringing this one down. I’m confident sitting on these low theta decay options for a little while.

The_Ni · March 31, 2022, 7:09pm

Thank you so much for creating this thread, @internetkings!

To summarize, the case for BGFV is:

It is a decent company that seems undervalued
It has been showing favorable price action recently
It has high SI and squeezed before, adding the potential for some gravy

The Company is Undervalued

BGFV is a ~$400M company that has had ~$1B income every year for the last 4 years, and last year, had $100M in profit.
Dividend yield is 5.68%
Gross profit is 37%, EBITDA is 12%, FCF margin is 8%
Price to book is 1.46, and PE is 3.8

If people spent money outdoor recreation through the worst of the pandemic, chances are they’ll keep doing so through whatever slowdown is happening.

The price is currently $17 . I haven’t run DCF calcs or done comps with peers, and doing PTs is always risky business anyway, but my mental marker based on the ratios and historical moves is around a $25 level. @conqueror you’d mentioned a discussion on fair value in the past but I could not locate it in the forums. If you could please link it, that would be great!

(From FinViz)

Price Action is Favorable

After all the squeezy stuff in Nov 2021, BGFV stepped back into the shadows and continued to be shorted, resulting the price getting stuck in the $17-$20 channel.

This changed with its earnings report on Mar 1, which seemed tepid at first (met on revenue, slightly missed on EPS, guided lower for Q1 2022 but issued a $25M buyback), but market took to it positively and prices started moving up on that orange trendline.

ASO’s earnings from May 29 gave it additional tailwind, although it has given up those gains and fallen back to the trendline.

Note that price is right on the 50SMA today also.

It is possible that BGFV falls below both the trendline and the 50SMA, in which case might release the July calls or a loss. But will hold on to the Leaps anyway as I do believe in the long term potential of this company.

Short Squeeze Potential

This is not a requirement of this play, and frankly if a squeeze happens, it would make sense to take profits and re-enter later when prices mean revert. But what has happened before may happen again as SI is 42% of FF and float itself is 21M only, so worth sparing a prayer for this. Not like the shorts are in kind of pressure though, but if price keeps drifting up and/or some pumper notices it, a squeeze could be triggered.

internetkings · March 31, 2022, 7:16pm

Interesting Take-in Market Beat

Small Snippet of the article.

" Shares are selling at a bargain 6X earnings as short interest rose over 40% of its float as of March 15, 2022. This sets up a potentially explosive short squeeze situation with a tiny 21 million share float. Prudent investors seeking a bargain entry into the sport goods segment can watch for opportunistic pullbacks in shares of Big 5 Sporting Goods."