I loved playing baseball as a kid.
The sandy ball fields, staring down batters from the mound, the orange slices after a game, and just being a kid on the diamond are all fond memories I have.
I even became an umpire to stay involved in the game. I loved it about as much as I loved playing.
But it was expensive!
I spent hundreds of dollars on shoes, shirts, pants, leg and chest guards and a mask.
And every year players would have new, more advanced bats, gloves and other accessories.
It wasn’t like that when I was a kid. Playing was simpler … and cheaper.
After a year of COVID-19 restrictions, teams are getting back to the baseball and softball fields.
So, I started researching the cost of playing youth baseball today.
Using Adam O’Dell’s six-factor Green Zone Ratings system, I found a company that has a strong share of the sports and swimwear market. It’s one we are “Strong Bullish” on.
The underlying stock is situated to outperform the broader market by at least three times over the next 12 months.
Pro tip: This sporting goods stock was one of the highest-rated companies in our weekly hotlist. To find out more about our weekly hotlist, click here.
Before we get into the stock, let’s look at where the sports and swimwear market is going in the future.
A Big Market Rebound Means Profits Galore
From 2012 to 2019, the sports and swimwear market saw rapid expansion.
In those seven years, the market grew more than 71% thanks to strong sales in sports equipment.
Market Revenue Expected to Jump 80% By 2025
The market suffered a 27% drop in revenue in 2020 thanks to the COVID-19 pandemic.
Lockdowns put a stop to baseball games, youth swim meets and other outdoor activities, so sales plummeted.
But the world is getting back to normal. And teams are returning to parks and pools in droves. That means the need for sporting goods and swimwear will grow.
Projections indicate by 2025, the sports and swimwear market will rise 80% from its low in 2020 and surpass the previous high in 2019.
Companies positioned as leaders in the market will see sales grow and profits explode. Investors in those companies will too.
Buy Big 5 Sporting Goods Stock Now
One of the biggest sporting goods and swimwear retailers in the United States is Big 5 Sporting Goods Corp. (Nasdaq: BGFV).
The company is based in El Segundo, California and operates 430 stores — mostly in California and the West Coast.
Big 5 Net Income to Hit $75 Million in 2021
From 2017 to 2019, Big 5 struggled.
It had sales, but the rate it was opening new stores cut into its net income — the profits left after taking out business expenses.
Despite the COVID-19 pandemic, the company saw $55.9 million in net income in 2020 — a 565% increase from 2019.
Projections indicate Big 5 will bring in $75.2 million in net income this year — an 800% increase from 2019 and a 35% upswing from 2020.
Big 5 Sporting Goods Stock Pops After Earnings
From June 2020 to May 2021, Big 5’s stock price was on a slow and steady climb.
On May 4, 2021, the company reported its quarterly earnings.
It included a 32% increase in same-store sales and earnings per share of $0.96 — well above the company’s guidance of $0.47 to $0.53 per share.
From May 4 to May 10, Big 5’s stock price jumped 64% … and kept going.
In the last 12 months, Big 5’s stock price has climbed 1,480%.
Using Adam’s six-factor Green Zone Ratings system, Big 5 Sporting Goods scores a 98 overall. That means we are “Strong Bullish” on this sporting goods stock and expect it to outperform the broader market by three times in the next 12 months.
Big 5 rates in the green in five of our six factors:
- Momentum — As seen by its stock chart above, Big 5’s stock has moved upward over the last 12 months. The big jump in May certainly helped its rating. Big 5 earns a 99 on momentum.
- Value — The company’s price-to ratios (earnings, sales, book and cash flow) are all either inline or slightly below the industry average … making it a good value stock. It scores a 99 on this metric.
- Quality — Big 5 has double-digit returns on assets, equity and investments — all double the industry average. That gives the company a 93 on quality.
- Growth — It’s strong first quarter of sales in 2021 helped give Big 5 a trailing 12-month sales growth rate of 13.4%. It’s one-year earnings-per-share growth rate is 546%. That earned the company an 87 on this metric.
- Size — Big 5 comes in with a market cap of a little more than $651 million, which puts it at the higher end of our size factor. It earned a 68 on size.
The company does score a 39 on volatility, mostly due to its slight pullback after reaching the $35 mark on June 2. However, the stock price is starting to move upward again.
Bottom line: The sports and swimwear sector of the market took a pretty big hit during the COVID-19 pandemic.
People just weren’t going outside, so they didn’t need products that Big 5 sold.
Now that has changed.
People are going out, kids are playing sports and we’re getting back to the normal we had before the pandemic.
This is going to give a huge boost to Big 5 and other retailers.
If you want to invest in the “return to normal” trend, it’s hard to beat Big 5.
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.