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3 Growing Retailers Trading for Less Than 10 Times Earnings

Going shopping for retailers these days is easier than you think. Many successful concepts have sold off with the rest of the market. Many of them were already trading at reasonable prices, and now they're being stocked in closeout bargain bins waiting for you to dust them off and head to the register.

Dick's Sporting Goods (NYSE: DKS), Camping World (NYSE: CWH), and The Container Store (NYSE: TCS) are three publicly traded chains. They are growing, and we're not talking about retailers posting gains after taking a step back in the pandemic. Dick's Sporting Goods, Camping World, and The Container Store all posted positive top-line growth in 2019, only to clock in with accelerating sales in each of the past two fiscal years. They're also all trading at single-digit trailing earnings multiples. The bargain bin is a pretty great place to find market deals.

Image source: Getty Images.

1. Dick's Sporting Goods

It's easy to see why Dick's Sporting Goods laced up and started sprinting in 2020. The pandemic shut down gyms, and initially it also put a dent in organized sports. Folks trekked out to Dick's Sporting Goods -- the country's largest sporting goods retailer -- to buy gear to remain active during the lull. Business picked up even more when it was determined that outdoor recreation was relatively safer than indoor activities.

Net sales went from rising a meager 4% in 2019 to 10% in 2020. The boom continued into fiscal 2021, with explosive 29% growth for the year that ended this January. Net sales decelerated to 7% for its latest quarter, but net income soared 50% on an adjusted basis, well ahead of Wall Street expectations.

Despite being a market leader -- making the most of being in the right place at the right time -- Dick's Sporting Goods can be had for less than eight times trailing earnings. It also recently increased its quarterly dividend by 11%. It now yields a reasonable 1.8%. Growth will likely cool down this year, but this is a company that has consistently exceeded analyst estimates.

2. Camping World

If we shift gears from playing outdoors to living outdoors, Camping World is the undisputed top dog in recreational vehicles or RVs. This was a highly fragmented retail niche until Camping World got busy giving regional mom and pop outfits an exit strategy. Camping World is another chain that has had three years of accelerating sales growth. Like Dick's Sporting Goods, we've seen the RV superstore chain's top line pick up the pace by climbing 2%, 11%, and 27% in the last three years, respectively.

RV sales surged during the pandemic when it became the safest way to travel across the country. Last year's acceleration came primarily from the higher prices that folks were willing to pay for new and used vehicles. However, a lot of people have bought a motorhome, camper, or towable over the last two years, and that means years of service and accessories that Camping World is more than happy to provide.

Camping World is revving up, but it's trading for just five times last year's earnings. Investors are concerned about the cyclical nature of RV sales, but investors are being rewarded for being patient. Camping World just increased its quarterly payout by 25%, giving it a current yield of 8.5%.

3. The Container Store

We can head back indoors for our final pick. The Container Store is a home goods retailer that is also known for its Elfa closet and custom drawer design platform. There's an encouraging three-year growth trajectory here, too, with the chain climbing 2%, 8%, and then 17% through the first three quarters of the fiscal year that ends later this month.

The Container Store has benefited from the suburbanization trend with folks moving from high rises to larger digs in the suburbs. With more space to flesh out, folks have been heading to The Container Store for housewares and upgrading their storage solutions.

Like Camping World, The Container Store can be had for less than five times trailing earnings. As a leveraged retailer, The Container Store's earnings multiple jumps to nearly 10 if it we go by its enterprise value. It doesn't pay a dividend, but that's probably not a bad thing until it whittles its debt down.

It's OK to go shopping when it comes to retail stocks. Dick's Sporting Goods, Camping World, and The Container Store trade at single-digit P/E multiples, but they have promising growth prospects.

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Rick Munarriz owns Camping World Holdings and Dick's Sporting Goods. The Motley Fool recommends Camping World Holdings and recommends the following options: short March 2022 $32 puts on Camping World Holdings. The Motley Fool has a disclosure policy.


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