Loop Capital Calls Big Lots (BIG) the 'Rodney Dangefield' of its Peer Group and Says it Should Consider LBO
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Loop Capital analyst Anthony Chukumba calls Big Lots (NYSE: BIG) the "Rodney Dangefield" of deep discount retailers and makes a case the company should go private.
Chukumba notes the stock trades at a 'sizeable' discount to peers despite its long track record of comparable store sales gains, operating margin expansion, and consensus earnings outperformance.
He believes the current leveraged finance market conditions would support a Big Lots transaction, and that the company would be attractive to financial sponsors.
"Based on our analysis, we believe a Big Lots LBO at $60/share would be financeable in the current markets and generate an IRR of 23% - comfortably above the 20%+ returns private equity firms typically target," Chukumba commented. "While we have no reason to believe a deal is imminent, we think the probability of a transaction could rise if Big Lots continues to “get no respect” from public equity investors."
The firm maintained a Buy rating and price target of $64 on BIG.
For an analyst ratings summary and ratings history on Big Lots click here. For more ratings news on Big Lots click here.
Shares of Big Lots closed at $48.13 yesterday.
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