Ollie's has had an impressive run over the past six months as its shares have beaten the S&P 500 by 11.4%. The stock now trades at $131.53, marking a 27.3% gain. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy OLLI? Find out in our full research report, it’s free.
Why Does OLLI Stock Spark Debate?
Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ: OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.
Two Positive Attributes:
1. New Stores Opening at Breakneck Speed
A retailer’s store count often determines how much revenue it can generate.
Ollie's sported 613 locations in the latest quarter. Over the last two years, it has opened new stores at a rapid clip by averaging 10.4% annual growth, among the fastest in the consumer retail sector. This gives it a chance to scale into a mid-sized business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
2. Surging Same-Store Sales Show Increasing Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Ollie’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 3.7% per year.
One Reason to be Careful:
Fewer Distribution Channels Limit its Ceiling
With $2.44 billion in revenue over the past 12 months, Ollie's is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.
Final Judgment
Ollie’s merits more than compensate for its flaws, and with its shares topping the market in recent months, the stock trades at 32.6× forward P/E (or $131.53 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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