On Monday, Bernstein adjusted its outlook on Burlington Stores (NYSE:BURL), increasing the price target to $285 from the previous $260. The firm maintained its Outperform rating on the retailer's shares. This move reflects the analyst's belief in the company's growth potential, particularly noting the effectiveness of Burlington's store expansion strategy.
Burlington Stores' stock has experienced a significant surge, with a 65% increase since the November results and a 17% rise year-to-date. Despite this strong performance, Bernstein sees further growth opportunities that they believe are not yet fully accounted for in the stock price. The firm's analysis suggests that Burlington's earnings per share (EPS) could double over the next five years solely based on the store growth strategy, projecting a compound annual growth rate (CAGR) of 13%.
The confidence in Burlington's growth is further supported by the potential of additional turnaround strategies. With these factors combined, Bernstein models a 25% EPS CAGR for Burlington through 2028. The revised $285 price target is a testament to this confidence, as the firm sees more robust prospects for the retailer's medium-term growth narrative.
The expansion strategy is seen as the most significant driver of EPS growth. Bernstein highlights the retailer's opportunity to add over 500 new stores, with a current pipeline that includes more than 64 locations previously operated by Bed Bath & Beyond in high-quality areas.
The management team, with a background from Ross Stores (NASDAQ:ROST), brings extensive experience in launching and operating off-price retail outlets, which further underpins the analyst's optimism about Burlington's expansion capabilities.
InvestingPro Insights
In light of Bernstein's positive outlook on Burlington Stores (NYSE:BURL), recent data and insights from InvestingPro provide a nuanced perspective on the company's financial health and market performance. Burlington's market capitalization stands at a solid $14.64 billion, and the stock is trading near its 52-week high, with the price at 98.52% of this peak level. This proximity to the high watermark aligns with Bernstein's optimistic price target adjustment.
An InvestingPro Tip worth noting is that Burlington is currently trading at a low Price/Earnings to Growth (PEG) ratio of 0.85 for the last twelve months as of Q4 2024. This suggests that the company's stock may be undervalued relative to its earnings growth, which supports Bernstein's thesis of further growth potential. Additionally, the company has seen a robust six-month price total return of 68.89%, reflecting strong market momentum that could intrigue potential investors.
However, it's important to consider that Burlington is trading at a high Price/Book ratio of 14.63, which might raise concerns about valuation among cautious investors. This figure indicates that the stock's market value is significantly higher than the company's book value, which could be a point of consideration when evaluating the stock's current pricing.
For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available that delve into various aspects of Burlington's financials and market performance. To access these insights and make informed investment decisions, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. Currently, there are 13 additional InvestingPro Tips listed that can provide further depth to the analysis of Burlington Stores.
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