Finish Line Initiated Outperform At Wedbush On Capital Allocation

According to Svezia, Finish Line has suffered over the years as it wasn't the best positioned to address changed trends and showcasing the right products to consumers. Moreover, the company has faced challenges with execution, e-commerce and its supply chain.

However, a mostly new management team including a new CEO, a new supply chain system in place and a store refresh campaign under way represents the necessary pieces for a more consistent sales and operating margin improvement moving forward.

Svezia isn't the only Wall Street analyst who is bullish on Finish Line's prospects. Analysts at Morgan Stanley also believe the company's new game-plan will achieve positive results.

Finally, the analyst noted that shares of Finish Line are trading at 11x P/E, or a 14 percent discount to its five-year historical average.

Svezia's $25 price target is based on a 14x P/E multiple on an estimated earnings per share of $2.30, an estimate that "doesn't take much" to achieve. Specifically, the company could generate an earnings per share of $2.30 by fiscal 2020, which doesn't even include benefits from leveraging its supply chain, benefits from store remodels, full-priced sales, growth in digital and profitable or divested Jack Rabbit.

"Investors give little value to the after mentioned factors," the analyst argued.

In addition, Svezia is estimating Finish Line will achieve a free cash flow of $83 million in fiscal 2017 and $97 million in fiscal 2018, sufficient enough to support a healthy buyback program and a two percent dividend yield.

Bottom line, the stock suffered from a "bumpy run but [Finish Line's] finish line finally maybe in sight."

At last check shortly after Wednesday's opening bell, Finish Line was up 2.55 percent at $19.70.