Bed Bath & Beyond Reality

The selling in Bed Bath & Beyond (BBBY) is getting a bit beyond reasonable.
Let’s run the history. In early June, the stock’s at $40.50 when the company says Q1 EPS (May) will be 36 to 38 cents. Not good since the Street was looking for 39 cents.
Naturally, the market freaks because BBBY never warns. They’ve nailed their number for something like 15 straight years. Having them miss is like watching the Orioles two-hit the Yankees. How often is that gonna happen?
Three weeks later, BBBY reports 38 cents a share. So they were off by a penny and the stock drops to $36. If you’re scoring at home, that’s 450 pennies in missing price for one penny in missing profit. That lost value has a P/E ratio of…many.
On the call, the company said that Q2 EPS (August) will either be flat or up in the low single-digits. Since last year’s Q2 came in at 51 cents, I take that to mean 51 to 53 cents a share. (I used math on that.)
There’s been zero news since then and the stock is now below $34 a share. Yes, I know—housing’s a mess, but that’s not all of BBBY’s biz. They’re not Mortgage Mortgage & Beyond.
The stock is about where it was six years ago when the housing boom was just starting. This is one those companies that regularly churns out top-notch returns-on-equity. No debt, solid ratios—and now, a good price.

Posted by on August 15th, 2007 at 6:30 am


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