Buckle (BKE) reports on May 24th. Watch.

In recent years, a huge number of companies conduct unprofitable activities and no one is confused. We are told about the incredible hype or the number of subscribers or new science fiction ideas or saving the future of the planet. They talk about everything except … a P/E.

Recall a very simple indicator that is considered in the first class of any investment training. Price to Share Ratio = Price per Share ÷ Earnings per Share (EPS). A higher P / E ratio means that buyers must pay a higher price for every $ 1 they earned by the company over the past year. This is not necessarily good or bad, but a high P / E implies relatively high expectations of what the company can achieve in the future. And every time a company on a conference call after the publication of statements has to explain why investors should now pay such a future P / E. Investors may disagree and, according to the results of the reporting, derail the company’s shares by voting with their own dollars.

Look at the classic modest Buckle (retailer of traditional American clothing, more than 450 stores in 50 countries):

P / E 9.25 = 18.27 ÷ 1.97 dollars (as of February 2019) For each dollar earned by the company, the share buyer must pay $ 9. Judging by the average result for the industry – this is a low investor expectation. We are looking at capitalization – $ 0.9 billion with a net income of $ 0.095 billion and revenue of $ 0.88 billion. We are looking at dividends – $ 1 per share per year and still not forgetting the “special dividend” for the results of the year in which almost all profits are distributed, and this is still almost $ 1 ! Because Debt / Eq = 0! Because nobody needs to pay debts. Shareholders quietly make cashouts every year and allow investors to take part in it. Practically, the situation is the following: buying this stock for a long-term, you take a tool with a fairly well predicted return of almost $ 2 per share. And this is 11% per annum. Not bad. So look at how Buckle reports, skip the emotional part and buy this promotion. If expectations are worse than forecasts – you buy it with even lower P / E, if expectations coincide with the forecast – the stock will quickly catch up with 26% lost this year. By the way Zacks investment rating for Buckle – “Strong Buy”.