Why Ollie's Bargain Outlet Holdings (OLLI) Is On Investors' Radar Now

Ollie's Bargain Outlet Holdings (OLLI) has attracted fresh attention after recent trading left the stock with mixed near term returns, including a modest 1 day gain and a small move over the past week.

Over the past month and past 3 months, the share price has seen mid single digit declines, while the 1 year total return is in positive territory. This split picture is prompting closer inspection of how the discount retailer’s fundamentals line up with the current price.

That latest 4.18% 1 day share price return, following a recent patch of weaker 30 and 90 day share price returns, sits alongside a 1 year total shareholder return of 6.60% and a 3 year total shareholder return above 100%. This suggests long term holders have seen much stronger gains than recent short term traders.

If this mix of short term volatility and longer term performance has you thinking about where else value might be hiding, it could be worth lining up Ollie's against our 18 top founder-led companies as another set of ideas to review next.

So, with Ollie's showing positive 1 year and very strong 3 year total returns, annual revenue and net income growth above 10%, and a last close of $109.25 against a $138.93 target, is there still a buying opportunity here, or is the market already pricing in future growth?

Most Popular Narrative: 22.7% Undervalued

At a last close of $109.25 against a narrative fair value of $141.40, the current share price sits well below what the most followed model suggests, which is why the underlying assumptions are getting so much attention.

The company is benefiting from a growing value-conscious consumer base, amplified by economic uncertainty and inflation, which is driving more customers toward discount retailers like Ollie's; this is boosting both store traffic and revenue growth, as seen by accelerated customer acquisition and rising loyalty program membership. (Revenue)

Want to see what kind of revenue and earnings path has to play out to reach that fair value? The narrative leans on firm growth, improving margins, and a higher future earnings multiple that still steps down from today. Curious how those moving pieces fit together over time and why an 8% plus discount rate still lands above $140? The full narrative lays out the numbers behind that gap to the current price.

Result: Fair Value of $141.40 (UNDERVALUED)

However, this depends on closeout inventory remaining abundant and new stores performing well. Any sourcing squeeze or weaker openings could quickly challenge that upside story.

Another View: What The P/E Ratio Is Signalling

That 22.7% gap between the $109.25 share price and the $141.40 narrative fair value leans on long term growth and margin assumptions, but the current P/E of 27.8x tells a different story when you compare it with the numbers around it.

On one hand, OLLI trades well above the North American Multiline Retail industry average P/E of 17.1x, and above an 18x fair ratio that our work suggests the market could move toward over time. On the other, it sits below a 35.2x peer average, which hints at room for either catch up or further pullback, depending on how earnings and sentiment evolve from here. So is this a premium that can stick, or a valuation gap that eventually closes?

Next Steps

If the mix of optimism and caution in this story feels familiar, it is a good moment to check the details yourself and move quickly. You can see exactly what the market is currently optimistic about by reviewing the 3 key rewards and weighing those points against your own expectations.

Looking for more investment ideas?

If Ollie's has your attention, do not stop here. Use the screener to quickly spot other stocks that could suit your approach before the crowd catches on.

• Target dependable income by reviewing companies in our 14 dividend fortresses and see which yields align with your tolerance for risk.
• Hunt for quality at a sensible price by checking the 48 high quality undervalued stocks that pair solid fundamentals with what our models flag as discounted valuations.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.