Since November 2024, Academy Sports has been in a holding pattern, posting a small return of 0.8% while floating around $45.60.
Is there a buying opportunity in Academy Sports, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Academy Sports Not Exciting?
We're sitting this one out for now. Here are three reasons why you should be careful with ASO and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Academy Sports’s 4.2% annualized revenue growth over the last five years was sluggish. This was below our standard for the consumer retail sector. 
2. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales show the change in sales for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year. This is a key performance indicator because it measures organic growth.
Academy Sports’s demand has been shrinking over the last two years as its same-store sales have averaged 5.9% annual declines.
3. Shrinking Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Looking at the trend in its profitability, Academy Sports’s operating margin decreased by 1.9 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 9.1%.
Final Judgment
Academy Sports isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 6.9× forward P/E (or $45.60 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at the Amazon and PayPal of Latin America.
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