As of April 29, Cabela's was trading at 17.2x Wachovia's 2005 EPS estimate of $1.12. The stockprice represents a 15% premium to Wachovia's 3- to 5-year EPS growth rate of 15%. Wachovia's 12-monthvaluation range is $18 to $20 per share.
"We continue to believe that Cabela's can maintain a~15% compound annual EPS growth rate over the next 3to 5 years," Jean writes. "However, the given currentvaluation on shares of (Cabela's), we believe sharesare fairly valued and that earnings upside potentialis minimal."
Cabela's posted EPS 12 cents for the first quarter,which was in line with Wachovia's estimated. Totalrevenue increased 12% to $350.6 million, roughly $25million more than Wachovia expected.
Jean points to Cabela's market leadership position,category dominance and strong brand "among otherthings" as reasons for the strong performance.Moreover, the retailer will increase its retailpresence by opening two stores in Texas, one in Utahand one in Minnesota. These four stores, totaling750,000 sf, will increase Cabela's total squarefootage by 57% in 2005.
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