Academy Sports & Outdoors (ASO) resembles a pandemic play that saw sales for its various outdoors and sporting wears spike as people’s buying habits changed, suggests Mike Cintolo, editor of Cabot Top Ten Trader.

Now business is sloughing off some, due to tough comparisons (same-store sales slipped 7.2% in Q3, partly due to a decline in ammo sales). But under the hood, there’s a lot to like here, which is why the stock recently popped to new highs.

First, it looks like the same-store sales declines will ease as comparisons get easier, footwear (up 5.1% in the quarter) and apparel (up 1.5%) continue to grow and as e-commerce (up 11% from last year) does the same. (The firm stuck to its long-term outlook for low single digit same-store sales growth and high single digit total sales growth.)

Second, management is thinking big, aiming to become the largest outdoors play in the country, with its 268 store count today growing by 80 to 100 over the next five years (up 30%-plus; nine have been opened so far this year and management sees the potential for 675 locations in the long-term) that one analyst thinks could add a whopping $4 per share of earnings to the already-elevated bottom line.

And third, the stock is super cheap (~8x earnings), which has led the top brass to put a lot of money toward share buybacks of late (share count down 13.3% from a year ago!), which should help keep earnings per share up in the near term.

The bottom line here is that, instead of giving up a good portion of its pandemic-induced earnings gains, Academy should see the bottom line hold up for a bit and then push higher starting late next year. It’s a unique situation with a growth angle that should keep buyers interested.

Technically, ASO’s long-term chart is hard to beat, with a big correction in the spring, monster-volume support at the lows, a rebound back to its highs in the fall and then a tight, proper launching pad near those highs during the following three months — resulting in last week’s huge-volume breakout. Near-term, some wobbles are possible given the sell-on-strength environment, but we’re OK grabbing a few shares here or on dips.

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