Today we are looking at DICK'S Sporting Goods, Inc. (NYSE: DKS), to determine if you should buy DKS stock. We will look at DKS financial ratios, analyst ratings, and current valuation to determine a DKS forecast and price.

What Does DKS Do?

DICK'S Sporting Goods, Inc., together with its subsidiaries, operates as a sporting goods retailer primarily in the eastern United States. The company provides hardlines, including sporting goods equipment, fitness equipment, golf equipment, and hunting and fishing gear products; apparel; and footwear and accessories. It also owns and operates Sporting Goods, Golf Galaxy, Field & Stream, Public Lands, Going Going Gone!, and other specialty concept stores.

DKS Stock Analysis and Forecast

DICK'S Sporting Goods, Inc. Competition and Comparables

In order to undergo a comparable analysis (to determine DKS stocks value), we need to first outline who DKS's competitors are.

These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to DKS, and have a market cap similar to DKS (if possible).

By keeping this in mind, I found the following list of companies to be some of DKS stocks closest competitors:

LEVI, ARMK, CPRI, ASO, BGFV, ALV, SEE, LAD, BERY, QS

DKS Stock News and Information

Recent news

DKS recently reported their Q1 2022 earnings, which was somewhat mixed.

Overall, DKS beat their EPS estimates by over 12% which is fantastic. However, they weakened their guidance on the rest of the year, which is why there was a mixed reaction. DKS opened down 10% to open the day (following earnings) but has managed to recover these losses and is now up 8%.

To read more about this earnings report, here is a link to an article

Analysis of DICK'S Sporting Goods, Inc. Stock Performance and Financial Ratios

Yearly:

DKS Revenues: In FY 2021, DKS experienced a yearly increase in revenues of $833.28M (or 9.52%) resulting in a total revenue figure of $9.58B.
DKS Cost of Revenues: In FY 2021, DKS experienced a yearly increase in their cost of revenues of $337.13M (5.44%), resulting in a total revenue figure of $6.53B. Since the increase (of 5.44%), in DKS's cost of revenue was lesser (by -4.08%) than the increase (of 9.52%) in DKS's revenues, we should expect that DKS experienced an increase (roughly 4.08%) in their FY gross profits.
DKS Gross Profit: In FY 2021, DKS experienced a yearly increase in their gross profit of $496.15M (or 19.42%) resulting in a total gross profit of $3.05B. This increase is consistent with our conclusion from the comparison of revenues and cost of revenues between Fiscal Years.
DKS EBITDA: In FY 2021, DKS experienced a yearly increase in their EBITDA of $391.4M (or 56.3%) resulting in a total EBITDA of $1.09B. This increase (of 56.3%) stems from the fact that DKS experienced a increase in their gross profits of 19.42% (as we saw in the previous bullet point).
DKS Net Income: In FY 2021, DKS experienced a yearly increase in their net income of $232.79M (or 78.26%) resulting in a total net income of $530.25M.
DKS EPS: As a result of DKS's increase in net income of $232.79M, DKS's EPS also increased (by $2.95) from $3.34 in FY 2020 to $6.29 in FY 2021

Overall, DKS had a very good performance in 2021, which is fantastic. However, how has DKS fared over a more recent timeframe?

Quarterly:

DKS Revenues: In Q3 2021, DKS experienced a quarterly decrease in revenues of $-527.2M (or -16.1%) resulting in a total revenue figure of $2.75B.
DKS Cost of Revenues: In Q3 2021, DKS experienced a quarterly decrease in their cost of revenues of $-276.69M (-14.06%), resulting in a total revenue figure of $1.69B. Since the decrease (of -14.06%), in DKS's cost of revenue was greater (by 2.04%) than the decrease (of -16.1%) in DKS's revenues, we should expect that DKS experienced an decrease (roughly -2.04%) in their Q3 gross profits.
DKS Gross Profit: In Q3 2021, DKS experienced a quarterly decrease in their gross profit of $-250.5M (or -19.16%) resulting in a total gross profit of $1.06B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q3 and Q2.
DKS EBITDA: In Q3 2021, DKS experienced a quarterly decrease in their EBITDA of $-90.71M (or -12.09%) resulting in a total EBITDA of $659.28M. This decrease (of -12.09%) stems from the fact that DKS experienced a decrease in their gross profits of -19.16% (as we saw in the previous bullet point).
DKS Net Income: In Q3 2021, DKS experienced a quarterly decrease in their net income of $-179M (or -36.12%) resulting in a total net income of $316.51M.
DKS EPS: As a result of DKS's decrease in net income of $-179M, DKS's EPS also decreased (by $-2.11) from $5.86 in Q2 2021 to $3.75 in Q3 2021

Overall, it seems as though DKS had a poor financial performance (due to EPS $-2.11) as many of their financial metrics shrunk, most notably their EPS (by $-2.11), as well as their net income (by $-179M), and other metrics (as you can tell from the above bullet points).

However, DKS stock beat their EPS estimate by $0.21(or 6.12%), as they reported an EPS of $3.64 or the quarter (compared to their estimated EPS of $3.43).

Is DKS Share Dilution an Issue?

As part of their Q3 2022 earnings release, DKS stated that they currently have 84.51M Shares Outstanding (weighted average), which is up 0 shares (from 84.51M shares outstanding in Q2 2022). This is great news for investors as it is one less thing that they will have to worry about.

Furthermore, DKS stock has up to 24.76M of shares that they can issue (thereby diluting DKS's stock). This maximum dilution for the period would have a dilutionary effect on DKS of 29.3%. This is very high, and should be worrysome to investors.

Latest DKS Stock Analyst Ratings

Here is the current analyst rating distribution for DKS. In total there are 26 DKS stock analyst ratings.

20 Buys
6 Holds
0 Sells

Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if DKS stock is a buy or sell

DKS Stock Rating and Forecast

Currently, we have 3 financial ratings that help investors get a general idea of a company's valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate.

Firstly, DKS stock has a DCF rating of 5 - Very Strong. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating.

Secondly, DKS stock has an ROE rating of 4 - Strong. DKS's current ROE is 59.39%, which is very high considering their rank of 4 - Strong. ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently -11.35%. As a result of DKS high ROE, and their peer's very low ROE, I think DKS should have a rating of 5 in this category.

Lastly, DKS stock has a P/E rating of 4 - Strong. DKS stock price to earnings ratio is currently 5.14 which should very good and might indicate that their rank of 4 - Strong is low. Price to Earnings is the most commonly found financial metric and is best used when comparing a company's p/e to the industry average. DKS operates in the Specialty Retail industry, which currently has an average P/E of 9.61. Overall, I think DKS price to earnings rating should be a 5 due to it being very low in general, and with respect to their peers.

Overall, based on the 3 previously mentioned fields, DKS stock has been given a comprehensive rating of 5 - Very Strong. This rating implies that they are healthy financially.

DKS Stock Price Prediction and Valuation

The Latest DKS Ratings

As we know, DKS stock has been given an overall rating of 5 - Very Strong. This implies that DKS is sound fundamentally and is a good candidate for being “undervalued”. With this in mind, let's proceed.

DKS Price Forecast Using Comparable Analysis

Price to Book (P/B): DKS's current P/B ratio is 2.71, compared to the average P/B ratio of DKS's peers being 3.15. This implies that DKS is undervalued and their share price should change by a factor of 16.15% to be at fair value (based on DKS's P/B compared to the P/B of their peers).
Price to Equity (P/E): DKS stock P/E ratio is currently 5.14, compared to the average P/E ratio of DKS's peers being 9.61. This implies that DKS is undervalued and their share price should change by a factor of 87.18% to be at fair value (based on DKS's P/E compared to the P/E of their peers).

Overall, DKS stock is undervalued and needs to experience a change in stock price of (an average of) 51.66% to be considered “at fair value”.

Is DKS Stock a Buy or Sell?

Overall, due to the overall stock rating of 5 - Very Strong (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that DKS was undervalued and need to experience a price change of 51.66% in order to be at their fair value, I have concluded the following:

I think that DKS is financially healthy, and is a strong candidate for being undervalued. As a result of this I would consider buying the DKS stock at these levels.