Disappointing Discount Retailer Sporting Cheap Options

Shares of Burlington have seen a 50% decline year-to-date

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Burlington Stores, Inc. (NYSE:BURL) is an American off-price retailer. BURL’s stores offer in-season, fashion-focused merchandise at up to 60% discounts. The discount retailer's product offering includes women’s apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts, and coats. At last check, BURL is trading down 2.6% at $139.78.

Burlington stock has decreased about 52% over the past 12 months and in 2022. The equity has also seen a 5% decline over the past month, and is currently trading just 8% off its June low of $133.28. Nonetheless, Burlington stock maintains a high valuation at a forward price-earnings ratio of 34.97 and a price-sales ratio of 1.09.

In addition, BURL holds a weak balance sheet with $627.05 million in cash and $4.57 billion in total debt, providing very little security for long-term investors. Short interest has been falling, down 14.6% during the most recent reporting period. This accounts for over 5% of the stock's total available float, and would take short sellers just over three days to buy back. 

Regardless, options are looking affordable. This is per the stock's Schaeffer's Volatility Index (SVI) of 47%, which ranks in the 34th percentile of its annual range. In simpler terms, options traders are pricing in relatively low volatility expectations at the moment.

 

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