Burlington has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 13.6% to $355.47 per share while the index has gained 13.1%.
Is BURL a buy right now? Find out in our full research report, it’s free.
Why Does BURL Stock Spark Debate?
Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE: BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.
Two Positive Attributes:
1. Surging Same-Store Sales Show Increasing Demand
Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Burlington’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 3.5% per year.
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Burlington’s margin expanded by 6.4 percentage points over the last year. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat. Burlington’s free cash flow margin for the trailing 12 months was 3.2%.
One Reason to Be Careful:
Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Although Burlington has shown solid fundamentals lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.5%, somewhat low compared to the best consumer retail companies that consistently pump out 30%+.
Final Judgment
Burlington’s merits more than compensate for its flaws. At $355.47 per share (or 29.3× forward P/E), is now the right time to buy the stock? See for yourself in our full research report, it’s free.
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