BOOT Stock Study (4-26-23)

I recently did a stock study on Boot Barn Holdings Inc. (BOOT) with a closing price of $70.09.

M* writes:

     > Boot Barn Holdings Inc operates specialty retail stores. The
     > company sells western and work-related footwear, apparel, and
     > accessories in the United States. It is a single operating
     > segment, which includes net sales generated from its retail
     > stores and e-commerce websites.

This medium-sized company has grown sales at an annualized rate of 18.5% over the last 10 years and EPS 41.8% per year since 2014. Lines are mostly up, straight, and parallel except for EPS dip in ’15 and projected dip in ’22 (FY ends 3/23). PTPM over the last 10 years has risen from 0.6% to 17% (upside outlier in ’21) with a last-5-year average (excluding the outlier) of 6.6%. This was below peer and industry averages until 2020.

ROE has increased from 10.1% in ’14 to 34.0% in ’21. The last-5-year average is 18.9%, which seems slightly below (above) the industry (peer) average. Debt-to-Capital has averaged 45.7% over the last five years and has been higher than peer and industry averages until ’19. The company has no long-term debt, though, and Interest Coverage is 48.8. Value Line gives a B+ rating for Financial Strength.

I forecast long-term annualized sales growth of 7% based on the following:

• CNN Business projects 13.3% YOY and 9.5% per year for ’22 and ’21-’23, respectively (based on 13 analysts).
• YF projects YOY 12.5% and 7.6% for ’23 and ’24, respectively (14 analysts).
• Zacks projects YOY 12.7% and 8.2% for ’23 and ’24, respectively (5).
• Value Line projects 7.5% growth per year from ’21-’27 (FY ’22 still labeled as incomplete).
• CFRA projects 12.6% YOY and 10.1% per year for ’23 and ’22-’24, respectively (14).
• M* gives a 2-year ACE of 9.1%.

I am forecasting just below the range.

I forecast long-term annualized EPS growth of 4% based on the following:

• CNN Business reports contraction of 10.1% YOY and 1.6% per year for ’22 and ’21-’23, respectively (based on 13 analysts), along with 5-year annualized growth of 6.6%.
• MarketWatch projects 1.6% per year contraction and 2.8% growth per year from ’22-’24 and ’22-’25 (14 analysts).
• Nasdaq.com projects 8.7% YOY growth and 11.7% growth per year for ’24 and ’23-’25, respectively (6, 7, and 2 analysts for ’23, ’24, and ’25).
• Seeking Alpha projects 4-year annualized growth of 18.5%.
• YF projects YOY 12.2% contraction and 7.4% growth for ’23 and ’24, respectively, along with 1.2% growth per year for the next five years (14).
• Zacks projects YOY 9.6% contraction and 8.1% growth for ’23 and ’24, respectively, along with 10.6% growth per year for the next five years (5).
• Value Line projects annualized growth of 4.2% from ’21-’27 (FY ’22 still labeled as incomplete).
• CFRA projects 12.5% YOY contraction and 2.6% contraction per year for ’23 and ’22-’24, respectively (14).

I am forecasting near the lower end of the long-term-estimate range (mean of five: 8.2%).

My Forecast High P/E is 19. High P/E has ranged from 19.3 (’17) to 93.1 (upside outlier in ’15) since 2014. The last-5-year average is 25.6. I am forecasting below the range.

My Forecast Low P/E is 7. Low P/E has ranged from 4.9 (’19) to 31.3 (upside outlier in ’14) since 2014. The last-5-year average is 7.2. I am forecasting higher than values from ’17, ’19, and ’20.

My Low Stock Price Forecast (LSPF) is the default value of $38.90. This is 44.5% less than the previous close and 22.5% less than the 52-week low.

These inputs land BOOT in the HOLD zone with an U/D ratio of 1.9. The Total Annualized Return (TAR) is 12.9%.

PAR (using Forecast Average—not High—P/E) is 4.6%. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 133 studies done in the past 90 days (61 outliers and my study excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 9.2%, 10.0%, 20.0, and 7.2. I am lower across the board. Value Line projects a future average annual P/E of 17.0, which is higher than MS (13.6) and higher than me (13.0). MOS seems healthy, here.

With regard to other data, MS high and low EPS are $8.95/share and $5.56/share compared to my $6.76 and $5.56. My high EPS is lower due to a lower forecast growth rate, and the latter is TTM (default) as of today’s date [although this is the first time I’ve never seen these match, I’ll chalk it up to coincidence since the mean low EPS is $5.70]. MS LSPF is $44.60 (14.7% higher than mine), which is ~11% more than the default $5.56 * 7.2 = $40.03, implies a Forecast Low P/E of 8.0, and effectively raises the MS future average P/E to 14.0.

I would look to re-evaluate under $61/share.