Shares of online retailer
) have neared its 52-week high after this Zacks #1 Rank (Strong
Buy) delivering solid third quarter results, which included a
triple digit earnings surprise.
On October 25, 2012, Overstock.com reported third quarter 2012
earnings per share of 11 cents, crushing the Zacks Consensus
Estimate calling for a 10-cent loss. Net sales increased 6.5% to
$255.4 million year over year. The average order size increased
during the period, but this was offset by a lower number of orders.
Gross margin improved 220 basis points (bps) from the year-ago
quarter to 18.2% due to a product mix shift. Operating margin was
0.7% compared with a loss of 3.3% in the year-ago quarter.
Operating expenses fell 3.3% year over year to $44.8 million.
Earnings Estimate Revision
Earnings estimates remain well above levels from 2 months ago. The
Zacks Consensus Estimate for 2012 is up 17.6% in that time to 40
cents per share, while the Zacks Consensus Estimate for 2013 has
advanced 14.3% to 64 cents.
Valuation Is Attractive
Currently, Overstock.com is trading at a premium to most of its
peers based on P/E and P/B. Since its expected 5-year earnings
growth of 20.0% is higher than the 15.0% average for its peers, the
premium is justified. Additionally, the stock is trading at a PEG
ratio of 1.9, which is well below the peer group average of 9.4,
indicating that the momentum should continue.
Overstock.com shares have appreciated 15.9% in the past 6 months
compared to a mere 1.0% increase for the S&P 500.
Shares have traded at a premium to market leaders Amazon.com Inc. (
) and eBay Inc. (
) in the past 6 months.
The significant increase in stock price is on account of its strong
growth potential. The stock is currently trading above its 50 and
200 day moving averages of 10.59 and 7.96, respectively.
Trading volumes are considerably lower than its peers.
Incorporated in 1997 and headquartered in Salt Lake City, Utah,
Overstock.com is engaged in selling branded as well as non-branded
merchandise (bed-and-bath goods, home décor, kitchenware,
furniture, watches, jewelry, apparel, electronics and computers,
sporting goods, designer accessories and cars to name a few)
through its websites. Customers can bargain before purchase and
often get discounts. The majority of its revenue is generated in
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