I last wrote about appliance, electronics, and furniture retailer Conn's (CONN) as a Zacks #1 Rank Strong Buy in April after another solid quarterly report confirmed the growth that the Street was still underestimating.
Guess what? They did it again in early June and the stock has since made new all-time highs above $50. In fact, Conn's has consistently been a Zacks #1 Rank (Strong Buy), #2 (Buy), or #3 (Hold) since January 2011 when it was trading under $5!
Delivering consistent earnings beats -- averaging a 17.5% upside surprise for the past four quarters -- means the story is still rolling and has analysts scrambling to keep up.
Aren't Big-Boxes Just for 'Show-rooming' These Days?
If you've watched the 3-year decline of 'big box' appliance and electronics retailer Best Buy (BBY), you may have thought that this is a business model to stay away from. I certainly thought so until I discovered Conn's (CONN), a family-built retailer with over 55 stores in Texas, 6 in Louisiana, and newer footholds in Oklahoma City, Albuquerque, and Tucson.
Conn's roots go back to 1890 where it started life as a plumbing company in Beaumont, Texas. In 1934, Carroll Wayne Conn, Sr bought the company and within a few years began selling refrigerators and gas ranges. He didn't become the Sam Walton of appliances, but his legacy built a brand that Texans have come to know and trust.
Now they sell just about everything durable for the home, including entertainment electronics, furniture, mattresses and lawn and garden equipment -- and they've built a loyal customer base doing it with a focus on service and satisfaction. Bright, clean stores increase the appeal as well.
Sales and Profits Grow With Store Build-Out
Since coming public nearly a decade ago, Conn's has forged a steady expansion, with quarterly revenues averaging over $200 million for the past 5 years. The recent two quarters sales results both topped $250 million for the first time since 2008.
This sales growth is propelled by expansion with new locations built around their HomePlus store concept. Pricing power and margin improvement keep their earnings expanding as well, with mattresses and furniture a big contributor this year to double-digit same-store sales improvements.
Some analysts predict that the growth opportunity here for Conn's as they expand out of Texas to other regions of the country could see a quadrupling of its 70 stores over 10 years.
Does the Growth Story Warrant the Parabolic Price Move?
CONN the stock has had quite a run in the past year, moving from $15 to $55. And this has pushed the forward P/E to nearly 20X. To some investors, this chart might tell a story of the stock getting ahead of the earnings.