Is Burlington Stores Stock a Buy Ahead of Earnings?

Department store retailer Burlington Stores, Inc. (NYSE: BURL) is the third largest off-price retailer in the U.S., following TJX Companies (TJX) and Ross Stores (ROST). Burlington is slated to report earnings tomorrow, and will be looking to bounce back into profitability after two unprofitable quarterly reports. Despite the major volatility BURL has seen this year, the stock is only 8.4% off of its record of $250.89.

With earnings slated to be released tomorrow, let's take a moment to review previous earnings reports. Burlington Stores has beat expectations on three of its four most recent quarterly earnings reports. In the fourth quarter of 2019, Burlington Stores beat expectations by $0.15. In the company's fiscal first quarter of 2020, the company beat expectations by a margin of $0.02. Burlington Stores missed expectations by a large margin of $3.21 in the fiscal second quarter. In its most recent quarter, Burlington Stores beat its earnings target by $0.48, with a loss -$0.56 instead of the expected dip of -$1.04. As for Burlington Stores' upcoming earnings report, the company is expected to report an increase its EPS up to $0.16.

Before 2020, Burlington Stores was growing revenue by approximately $600 million on an annual basis. Burlington Stores had more than doubled its net income since 2017 heading into 2020. All signs had pointed towards continued growth for many years. Unfortunately, Burlington Stores was faced with the coronavirus pandemic this year and experienced the whack down that most brick-and-mortar companies experienced during the shutdowns.

Amazingly, BURL has recovered despite the fact that the company is looking to end the year on an unprofitable note. Positive sentiment surrounding Burlington Stores recovering its revenue and net profit growth is what is driving BURL stock’s pricing at the moment. However, investors should note that Burlington Stores carries nearly $5 billion in debt when considering the investment. BURL also currently sports a high forward price-earnings ratio of 32.47

Overall, Burlington Stores is will likely resume its growth pattern and eventually start producing new highs following the coronavirus pandemic. The purchase of BURL stock undoubtedly comes with risk for investors, but also has significant potential upside over the next 4-5 years for investors with patience.