Big Lots has added 8% in May, but is down 48% in the past year
Big Lots, Inc. (NYSE:BIG) has decreased by about 48% in price compared to what it traded at a year ago., with pressure emerging at several trendlines, most notably the 80-day moving average. The security has managed to tack on nearly 8% this month so far, rising slightly from its May 6, two-year low of $29.73.
Bears have been targeting Big Lots stock from all sides, with options traders especially fond of long puts of late. This is per BIG's 10-day put/call volume ratio of 12.27 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 99th percentile of its 12-month range.
Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.70 sits higher than 93% of readings from the past year. This means short-term options traders have rarely been more put-biased.
Analysts have also taken a bearish stance. Of the seven in coverage, four say "hold," and three say "sell" or worse.
Short sellers, on the other hand, are edging out of Big Lots stock, dropping 1.7% in the last reporting period. The 6.89 million shares sold short still make up a hefty 26.2% of the stock's available float, though, and would take over a week to cover, at the stock's average daily pace of trading.
The discount retailer now provides an extremely low valuation at a price-earnings ratio of 6.26 and a price-sales ratio of 0.17. Big Lots also offers a very attractive dividend yield of 3.59% with a forward dividend of $1.20, making the reward potential relatively high for long-term and dividend investors.
Nonetheless, BIG comes with a high level of risk as well. Big Lots currently has $1.82 billion in total debt, which is more than double the company’s market cap of $884.43 million. The discount retailer also holds just $53.72 million in cash on its balance sheet, which will undoubtedly hurt its long-term growth and profits.
BIG is already expected to experience declines for fiscal 2023, with estimates suggesting a 0.1% decrease in revenues and a 13.8% decrease in earnings. Overall, the business’ fundamentals simply present too many uncertainties for the profit potential behind Big Lots stock to be worth the potential losses.