May 25, 2022 - George Lucas
You are probably aware that DICK'S Sporting Goods, Inc. (NYSE: DKS) is a leader in the Specialty Retail space. In this analysis, we are going to look at some of the key financial ratios for DICK'S Sporting Goods, Inc. to determine a price prediction for DKS. Remember these price predictions take into account several assumptions (which I will highlight) to determine a future price. I'll share my DKS stock price prediction, then show you the approach and assumptions used to calculate the DKS stock forecast.
Before we go any further, let me start by saying this, stock forecasting is hard. I don't know what the future will hold, and neither do Wall Street Analysts. If they could accurately predict the future, they would be able to beat the S&P 500 and I would be extremely wealthy. What I can say is that we can use available data to determine a reasonable DKS stock forecast and helps us make better investment decisions, so hopefully, you find this analysis useful.
The DICK'S Sporting Goods, Inc. stock price prediction of $300 was derived from 3 main sources of data. I'll dive into the approach to show you how I determined how I “predicted” a stock price of $300 for DKS
The Financial growth Metrics provide an analytics valuation approach to determining a reasonable DKS stock forecast. The other two sources of data will be used to adjust the stock price prediction for DKS. Let's be honest, if you've ever done a valuation exercise on a stock or tried to determine the future price, it is both an art and a science.
For this part of the analysis, I am looking at the history of key financial metrics for DICK'S Sporting Goods, Inc. to forecast the stock into 2022 and 2025. Most investors know that historical performance does guarantee future performance, but it is useful to see how DKS has been trending.
DKS has experienced a 3 Year Earnings Growth Per Share of 150% (based on history). Let's assume that DKS can continue to grow Revenue and Earnings at a similar rate for the next three years, then we can assume the DKS stock forecast for 2025 will follow a similar growth trajectory. I recognize there are a lot of other factors but this is a straightforward and solid approach.
With DKS Earnings Per Share of 19.01 projected out at the 3 year growth rate gives us a future EPS of 60 If the current DKS Price to Earnings Ratio is 5.14 (and we assume this remains the same) then we determine the DKS stock forecast by multiple the P/E by the EPS to give us a stock price prediction of $300 per share (estimated)
There are other ways to predict the price for DKS but I would argue that P/E, EPS, and Earnings Growth are the most commonly used financial metrics by analysts and investors. This is why I used them to forecast DKS's stock price.
Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine a DKS stock forecast. It can also help you determine if you should buy or sell DKS There are a total of 26 analyst ratings for DKS. Here is the current breakdown of analyst ratings:
This breakdown of ratings indicates that Wall Street analysts are overall Bullish on DICK'S Sporting Goods, Inc. I factored this into the DKS stock price forecast by using it as direction guidance for the future. If you were to make investment decisions based on just analyst ratings, this would indicate DKS is a buy.
DKS's current P/E Ratio is 5.14 and has an ROE of 0.59. I would consider this a good P/E and ROE for DICK'S Sporting Goods, Inc.. These ratios in isolation provide some insights, but it is better to understand them in content for both DKS and the sector. Utradea provides a PE, ROE, and DCF rating for stocks ranked between 1 (very poor) and 5 (very strong). Without having to go through the calculations, this provides me with a reasonable view of if these key metrics for DICK'S Sporting Goods, Inc. are good or bad from an investment perspective. Here is a breakdown of the ratings
A DCF rating of 5 - Very Strong
A PE rating of 4 - Strong
An ROE rating of 4 - Strong
Based on the actual PE and ROE, along with the metric ratings, I would say that the DKS forecast is reasonable.
Should you buy DKS? Well, based on the DKS stock forecast of 300 per share, the underlying analysis, and the current price of DKS, I would agree with the analysts and say DKS is a buy. Let me know what you think, happy to dive into other aspects of DKS to help you make an informed investment decision.