Ollie’s Stock: Full Price For A Discount Retailer?

Note: Ollie’s FY 2024 ended Feb 2025.

Ollie’s Bargain Outlet Holdings’ stock (NASDAQ: OLLI) may be known for selling closeout merchandise, but its stock is priced anything but low. Trading at approximately $114 per share, OLLI appears significantly valued when compared to its financial fundamentals. Although the company has demonstrated some growth, its lackluster profitability, uncertain performance during downturns, and elevated valuation clearly indicate that this isn’t the investment bargain that buyers might expect. Nevertheless, for those investors seeking lower volatility than that associated with individual stocks, the Trefis High Quality portfolio offers an alternative – having outperformed the S&P 500 and delivering returns that exceed 91% since its inception.

Latest Quarter: Mixed Signals in Q1

Ollie’s Bargain Outlet reported mixed results for fiscal Q1. Sales increased by 13% year-over-year (y-o-y) to $577 million, though this was below market revenue expectations, raising concerns regarding demand consistency. On the profitability front, the company outperformed expectations: non-GAAP earnings per share were recorded at $0.75, 6% higher than analyst consensus, indicating improved cost controls or margin expansion. Even with a y-o-y decrease in operating margin to 9.7% from 11.1%, management maintained the full-year adjusted EPS guidance at $3.70 at the midpoint. The company wrapped up the quarter with 584 locations, a rise from 516 a year prior, and same-store sales increased by 2.6%, matching the pace of the previous year.

Valuation: High Price, Low Justification

The main concern lies with the valuation. Its price-to-sales ratio of 3.1 slightly surpasses the S&P 500’s 3.0, but that’s only the beginning. The price-to-free cash flow (P/FCF) ratio stands at 30.8, significantly higher than the S&P’s 20.5, and the price-to-earnings (P/E) ratio of 35.2 dwarfs the benchmark’s 26.4. For a company with modest performance metrics, these numbers imply that investors are overvaluing the underwhelming results.

Ollie’s has demonstrated respectable top-line growth, with revenues increasing at a 9.1% annual rate over the past three years and rising by 8% y-o-y to reach $2.3 billion in the last twelve months. The issue, however, lies in its profitability profile. The operating margin is at 11.0%, below the S&P 500’s 13.2%, while the operating cash flow margin lags at 10.0% compared to the index’s 14.9%. Its net income margin of 8.8% also falls short of the S&P’s 11.6%. These unsatisfactory margins not only disappoint—they position Ollie’s among the weakest performers within the Trefis coverage universe.

Financial Stability: A Bright Spot, But Not Enough

Ollie’s balance sheet is arguably its strongest feature. The company carries $648 million in debt against a market capitalization of $7 billion, resulting in a slim debt-to-equity ratio of just 9.7%—well below the S&P 500’s benchmark of 19.9%. Its cash-to-assets ratio, while consistent with the broader index, does little to mitigate the more apparent challenges: weak profitability metrics and an excessive valuation.

Downturn Performance: A Major Red Flag

Perhaps the most alarming indication for investors is OLLI’s performance during economic downturns. During the inflation shock in 2022, OLLI stock plummeted 64.2%, while the S&P 500 dropped 25.4%. During the 2020 COVID market crash, it declined 46.2%, compared to the broader index which fell 33.9%. Although the stock has since rebounded, these declines highlight its poor resilience during critical periods. Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the last six market crashes.

Skip This “Bargain”

Ollie’s Bargain Outlet may provide customers with great discounts, but the stock is hardly a bargain. The company’s modest growth and strong balance sheet are eclipsed by its weak profitability, limited protection against downturns, and a valuation that assumes perfect conditions. However, you might consider exploring the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stock benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) producing robust returns for investors. What accounts for this? The quarterly rebalanced variety of large-, mid-, and small-cap RV Portfolio stocks offered an agile way to capitalize on favorable market conditions while minimizing losses during downturns, as elaborated in RV Portfolio performance metrics.