Ollie's Bargain Outlet Shares Aren't Cheap After Q2 Beat

Consumers can find plenty of bargains at Ollie's Bargain Outlet Holdings Inc OLLI, but the same can't be said for investors, Buckingham Research Group's Kelly Halsor said in reaction to the company's second-quarter earnings report.

The company earned 27 cents per share in the quarter, while total sales rose 20.5 percent to $254.6 million on a 4.5 percent same-store sales increase. The earnings per share was 3 cents better than expected and the company pushed through 2 cents per share of the beat into its boosted fiscal 2017 guidance.

Yet despite a strong quarter that shows Ollie's business "continues to hum," investors should consider staying on the sideline, Halsor said. The reason for this is due to the stock's valuation in which shares are trading at 31x the analyst's fiscal 2018 earnings per share estimate that happens to be among the highest multiples across the group.

"We believe the stock largely reflects a strong earnings profile and potential upside to EPS this year," Halsor added. "As such, we will wait for a more attractive entry point to become more constructive on the stock."

Bottom line, Ollie's business will likely continue to standout in a "choppy" retail environment given its superior access to merchandise, which should help the company succeed in its long-term guidance for comp growth of up to 2 percent. However, at current levels the stock is fairly balanced.

Halsor maintains a Neutral rating on Ollie's stock rating with an unchanged $41 price target.

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