BJ’s had been a decent performer, starting from the $40’s range in 2020, to $65. (A lot of it Covid outperformance)
That’s about 16% per year. Though in the past year, BJ’s has had a negative return of 10%.
Currently it’s priced at 15x earnings with forward estimates of 5-6% in earnings and 4-6% in revenues, so that’s a Price to Earnings Ratio (P/E) of 15, with growth of 5, that’s a PEG ratio (P/E to Growth) of 3, which is high. I normally try not to pay more than 2, unless there is really superior growth. Not likely in this sector.
Contrast that with closest competitor Costco, which has earnings growth of 10 to 11% but at a P/E of 35 and – that’s even more expensive!
That said, Costco is a far superior business, with more stable margins, operating efficiencies and scale, which attracts both high volume sellers and customers. Costco is about 10X BJ’s and both started out around the same time. BJ’s unlikely to take market share from Costco,
Bottom line – If the stock becomes a bargain around $55 I could see it returning around 7-8% a year. On the other hand a company like this doesn’t fall as much in bad times, it’s a low risk stock.