I originally posted this in another forum but I'm posting this here to get y'all's thoughts on this analysis. Please let me know what you think!
Best Buy is a seriously undervalued stock at the moment. This is a fundamental investment idea and full disclosure I AM NOT A PROFESSIONAL TRADER.
Alright let’s get down to it.
The below information is a comparison between the Nine Months Ending of November 2, 2019 and October 31, 2020. BBY pulled back from a 52 Week high of $124.89 to right around $99.79 today. This has happened despite a rather substantial increase in many metrics. These metrics are a culmination of both domestic and international stores. However, BBY is ceasing all operations in Mexico hopefully by early fiscal 2022. They will remain in Canada (which will now be their only international business segment).
· Retained earnings increased 23.2%
· Diluted EPS increased from 2.96 to 3.74
· Revenue increased from 1.3% to 6.6%
· SG&A as % of Revenue DECREASED from 20.1% to 18.3%
· Domestic online revenue grew roughly 174%
Below is a breakdown of their business segments and how their sales increased:
· Computing and Mobile Phones: The 21.5% comparable sales gain was driven primarily by computing and tablets, partially offset by declines in mobile phones.
· Consumer Electronics: The 21.1% comparable sales gain was driven primarily by home theater and digital imaging.
· Appliances: The 39.3% comparable sales gain was driven by large and small appliances.
· Entertainment: The 17.5% comparable sales gain was driven primarily by gaming, virtual reality and drones, partially offset by declines in movies.
· Services: The 12.7% comparable sales gain was primarily due to our warranty and support services.
Below is some general information about BBY and a few quotes from their latest quarterly report:
General Info:
· BBY increased ALL employees pay to a minimum of $15 an hour
o This is huge because it is statistically proven that the amount of pay employees receive directly effects their performance, and therefore BBY’s performance.
o I realize it’s not huge, but when you are struggling that is a huge deal
· They issued $650 million in new notes due Oct 1, 2030 at 1.95%. They are using this to pay off $650 million debt coming due March 15, 2021 at 5.50% - Huge savings for them
· They donated 40 million to their foundation to help reach their goal of 100 Teen Tech Centers
o This helps underserved kids to have access to technology
Quotes: Very important info here!
· “On February 23, 2019, our Board of Directors authorized a $3.0 billion share repurchase program. There is no expiration date governing the period over which we can repurchase shares under the February 2019 authorization. On March 21, 2020, we announced the suspension of all share repurchases to conserve liquidity in light of COVID-19-related uncertainties. We resumed repurchases in the fourth quarter of fiscal 2021.”
o “As of October 31, 2020, $1.9 billion of the $3.0 billion share repurchase authorization was available.”
· “Our better-than-expected sales resulted in significant operating income rate expansion and earnings growth of 33% over the same period last year.”
------- And here is the best one -------
· “Historically, we have generated a large proportion of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico.”
o Their sales and revenue have increased substantially AND their MOST profitable quarter is yet to be reported.
So, what does all this mean?
The buybacks alone should increase the stock 5%.
They are raking in money hand over fist, despite their most profitable quarter not being reported.
They are getting the fuck out of Mexico (it wasn’t profitable this year and barely profitable in years prior)
They took advantage of the current interest rates and are restructuring their debt, smart.
They are investing in their employees by paying them more AND helping them with COVID related hardships
TLDR:
BBY has drastically increased their revenue due to a huge increase in sales while managing to actually reduce their costs as a % of revenue. Their most profitable quarter (4th quarter) is yet to be reported and I know they will perform.
Thanks for reading. Happy Holidays.
Submitted December 31, 2020 at 06:55PM by InLoveWithMyDick https://ift.tt/3hvAZdz
