Today's "Too Hot To Handle" series targets one of the S&P 500's top performers year-to-date, Big Lots . The stock is up 39% so far this year and a whopping 94% over the past three years.
Is the stock price justified?
We’ve got two analysts on both sides of the trade on this discount retailer.
Brian Sozzi, Equity Research Analyst at Wall Street Strategies has a 'buy' rating on the stock with a 12-month price target of $40 per share. Sozzi said "Big Lots is worth $40 per share and perhaps higher if you make more aggressive multiple assumptions based on a potential buyout."
Sozzi pointed out "private equity players are circling the retail sector" and the depressed relative and absolute valuation on Big Lots make it attractive. He also remains bullish on Big Lots new store growth, comp acceleration and margin benefits from better store productivity and tighter product buying.
Despite Sozzi's optimism, he warned one risk to watch is "inflation eating into the prices the company obtains on closeout and non-closeout merchandise."
Patrick McKeever, Managing Director & Senior Analyst at MKM Partners not too hot on Big Lots with a 'neutral'.
McKeever downgraded the stock on March 2nd after a big spike that left it close enough to his $45 price target. After the spike in the stock to $41, McKeever believes it made more sense for investors to lock in the gain than hold on for another 10% or so.
McKeever said Big Lots has a more discretionary mix and less defensive model than some of its discount store competitors. He also said another risk is that the firm generates "about 50% of its annual operating income in the fourth quarter."
"Too Hot To Handle" on Closing Bellat 330PM ET today.
DISCLOSURES: Sozzi, no conflicts. McKeever, no conflicts.
Donna Burton contributed to this article
Questions? Comments? Write firstname.lastname@example.org