Boot Barn currently trades at $163.29 and has been a dream stock for shareholders. It’s returned 623% since June 2020, blowing past the S&P 500’s 92.3% gain. The company has also beaten the index over the past six months as its stock price is up 10.5%.
Is now the time to buy Boot Barn, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Boot Barn Not Exciting?
We’re glad investors have benefited from the price increase, but we're swiping left on Boot Barn for now. Here are three reasons why we avoid BOOT and a stock we'd rather own.
1. Flat Same-Store Sales Indicate Weak Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Boot Barn’s demand within its existing locations has barely increased over the last two years as its same-store sales were flat.
2. Fewer Distribution Channels Limit its Ceiling
With $1.91 billion in revenue over the past 12 months, Boot Barn is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.
3. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Boot Barn’s margin dropped by 7.1 percentage points over the last year. This decrease came from the higher costs associated with opening more stores.
Final Judgment
Boot Barn’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 26.3× forward P/E (or $163.29 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. We’d suggest looking at a top digital advertising platform riding the creator economy.
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