BUCKLE INC/THE (NYSE:BKE) – A Quality Retail Stock Worth Considering

BUCKLE INC/THE (NYSE:BKE) stands out as a potential candidate for quality investors, based on our Caviar Cruise screening strategy. The company operates in the specialty retail sector, offering casual apparel, footwear, and accessories. With strong profitability, a healthy balance sheet, and reasonable valuation, BKE aligns with several key quality investing principles.

Key Strengths of BKE for Quality Investors

• High Profitability: BKE has a Return on Invested Capital (ROIC) of 44.86%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits. The company also boasts strong margins, with a 19.82% operating margin and 16.05% profit margin, outperforming most peers in its industry.
• Solid Financial Health: The company carries no debt, a rare and positive trait. Its free cash flow is strong, and the current ratio of 2.05 suggests ample liquidity to meet short-term obligations.
• Profit Quality: Over the past five years, BKE has converted 113.6% of net income into free cash flow, exceeding our 75% benchmark. This suggests earnings are backed by real cash generation rather than accounting adjustments.
• Dividend Track Record: BKE has paid dividends for at least 10 years, with an average annual growth rate of 11.22%. While the payout ratio is high at 101.31%, the lack of debt mitigates some sustainability concerns.

Valuation and Growth Considerations

BKE trades at a P/E ratio of 10.99, below both the industry average and the S&P 500. This makes it reasonably priced relative to its earnings. However, recent revenue and earnings growth have been modest, with a slight decline in the past year. Analysts expect slow but steady growth in the coming years.

Why BKE Fits the Quality Investing Approach

Quality investors prioritize companies with durable competitive advantages, strong financials, and consistent performance. BKE’s high ROIC, debt-free balance sheet, and reliable cash flows make it a compelling candidate. While growth is not explosive, the company’s stability and profitability align with a long-term buy-and-hold strategy.

For more quality stock ideas, explore our Caviar Cruise screener.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.