We’re always looking for the next great growth story, but given the tricky market environment, a bit of value and stability doesn’t hurt, either, suggests Mike Cintolo, editor of Cabot Growth Investor.

Academy Sports & Outdoors (ASO) fills that bill, with a business that’s far from revolutionary (all sorts of outdoors and sporting equipment) but has proved much more resilient than thought.

Most believed the boom in earnings (from $1.12 per share in 2019 to $7.60 in 2021) was something that would fade along with the pandemic, but while there’s been a bit of retrenchment business has hung in there nicely (regularly topping expectations), keeping earnings near their peak and allowing for a good amount of share buybacks.

Moreover, the firm itself is a top operator (better sales per square foot than competitors, etc.), and management is thinking big — Academy had 259 locations coming into 2022, opened nine new ones through October, and is likely to boost that count by another 80 or so (30%) over the next four years; the stores are expected to be EBITDA positive after year 1 and, in total, could easily add a few bucks to per-share earnings over time.

The risk, of course, is that the consumer really pares back and earnings do stumble, but big investors certainly aren’t looking for that—analysts see the bottom line holding steady (well above $7 per share) in 2023 and the stock looks great, actually breaking out from a huge launching pad after earnings in December and holding that level in recent weeks (a rarity in this sell-on-strength environment).

Near-term wiggles of two or three points wouldn’t be surprising, but we see a solid risk-reward situation here—we’ll buy a half-sized position (5% of the portfolio) tomorrow with a stop in the upper 40s.

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