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I came across Best Buy (BBY) this morning as I was scanning the list of greatest percentage movers. BBY is trading, as I write, at $51.65, up $3.25 or 6.71%. I do not own any shares of this stock nor have any leveraged or option positions. What pushed the stock up today was the fourth quarter earnings results reported today. For the fourth quarter ended March 1, 2004, "profit" jumped to $469 million or $1.42/share from $378 million or $1.16/share the prior year. What is most important about this was the fact that this EXCEEDED estimates as analysts were expecting $1.39/share for the quarter. In another report on the earnings reported that revenue for the quarter was $8.45 billion up from the prior year's $6.99 billion. Same store sales, what I think is one of the MOST important markers for retail success, was up a strong 9.7% in the quarter and gross margins widened to 25.4% from 25.1%. These are very nice results.
Looking a bit longer-term with a "5-Yr Restated" financials view from Morningstar.com, we can see the steady growth in revenue from $10.1 billion in 1999 to $23.1 billion in the trailing twelve months. Earnings have also grown steadily from $.69/share in 1999 to $2.17 in the trailing twelve months.
Free cash flow has varied considerable the past few years but has stayed positive ranging from $204 million in 2001 up to $962 million in 2002, dropping to $21 million in 2003 and coming in at $596 million in the trailing twelve months.
The balance sheet appears to be good with $1.8 billion in cash and $5.3 billion in other current assets, enough to cover the current liabilities of $6.0 billion but not quite enough to also cover all of the relatively small level of long term debt at $1.1 billion.
What about the valuation? I like to check with "Key Statistics" on Yahoo.com to review that part of the equation. The market cap on BBY is a large $16.9 billion. The trailing p/e isn't too bad at 23.95 and the forward p/e (fye 1-Mar-05) is better at 18.59. The PEG of 1.23 is also not too bad...being just a bit over 1.0. The price/sales is also nice at 0.68.
BBY has 324.67 million shares outstanding with 264.0 million of them that float. Currently there are 7.63 million shares out short as of 3/8/04, representing 2.186 trading days or 2.89% of the float. IMHO, this is moderate but not a heavy short interest.
The company DOES pay a small dividend of $.40/share yielding 0.83%. Yahoo reports that the last stock split was in May, 2002, when BBY had a 3:2 split.
What about the technicals? If we look at a "Point and figure" chart on BBY, we can see that the stock broke through a resistance level of about $27 in December 2002, and has headed higher since. It recently peaked around $62/share in December 2003, but is still trading above its "support level".
Overall, I think this is a great stock. The recent reports are very nice. I actually KNOW the retail venture as this is one of the places where my kids and I like to hang out on that Saturday afternoon to see the new computers or new DVD's or CD's. Seems like we spend a lot of Birthday money there! The balance sheet and free cash flow is solid, the PEG is reasonable and the technicals look nice. What is there NOT to like. I shall not be adding to my trading portfolio yet, as I am still WAITING for a sale of a portion of one of my holdings at a GAIN before adding Position #21. :).
Thanks so much for stopping by! I hope the above discussion was helpful for you! If you have any comments, questions, or words of encouragement (which ARE actually appreciated!), please email me at email@example.com