Ollie's Bargain Outlet Holdings, Inc. (OLLI) stock intrinsic value fair value estimate & owner earnings analysis

Ollie's Bargain Outlet runs warehouse-style discount stores that sell closeout and excess brand-name goods (housewares, food and consumables, seasonal items, books, small electronics and more) at prices it says are up to 70% below traditional retailers. It had 645 stores in 34 states at January 31, 2026, sells only in the United States, and is headquartered in Harrisburg, Pennsylvania. Net sales were $2.649 billion in fiscal 2025 (up 16.6%, including comparable-store sales growth of 3.7%), with net income of $240.6 million. It carries no borrowings on its balance sheet beyond an undrawn revolver, and held $296.3 million of cash and short-term investments. How we measure earnings. We start from operating cash flow, then remove the swings caused by inventory, payables, accrued expenses and taxes payable, subtract stock-based compensation as a real cost, and subtract only the part of capital spending needed to keep existing stores running (spending tied to sales growth is treated as growth spending). On that basis, owner earnings per share were: fiscal 2017 $1.55, 2018 $1.24, 2019 $1.39, 2020 $3.87, 2021 $2.29, 2022 $1.39, 2023 $1.65, 2024 $2.22, 2025 $3.49. Fiscal 2020 was inflated by pandemic-era buying conditions and is excluded from the reference level. Our reference level is the median of fiscal 2021 through 2025, which is $2.22 per share. Interest earned on the company's cash (about $18.7 million net in fiscal 2025) is part of this stream, so cash is not added again. We did not set the level from management's outlook. Base case: $40.9 per share. The one growth driver we credit is store openings, because it is a process the company has repeated every year and funded from its own cash: 45, 50 and 86 stores opened in fiscal 2023, 2024 and 2025 (468 stores at the start of fiscal 2023, 645 at the end of fiscal 2025), with average sales per store holding at $4,325 in 2025 versus $4,271 in 2024 even as 86 stores were added. We assume 60 openings a year for five years (the three-year average is about 60), then 45 a year for five more as the room narrows, ending near 1,170 stores. Each new store is assumed to earn what the average store earns in the reference level and to cost about $0.7 million of growth investment (capital spending plus inventory net of supplier credit above the maintenance level, derived from fiscal 2023-2025 cash flows). The company's own belief that it can reach more than 1,300 stores is a target, so we do not rely on it. Rising comparable-store sales, margin gains and share buybacks are left out because they are not locked in. After year ten the store base is assumed to keep earning the same amount, with no growth, for 15 more years, based on a business that has operated stores since 1982; nothing is credited after that. Growth reconciliation: owner earnings per share grew about 57% in fiscal 2025 ($2.22 to $3.49), while our year-one growth is about 9% because we build from the store-opening pace only. Bear case: $18.5 per share. Earnings fall back to $1.39 per share, the level the business produced in fiscal 2019 and again in fiscal 2022 when inflation and freight costs weighed on results, and the company opens 45 stores a year for five years and then stops (about 870 stores), with stores earning that level for 10 more years and nothing after. The filing notes higher supply chain costs, including incremental tariff expense, in fiscal 2025, and that construction and permitting delays have been experienced. Debt is not a factor in the downside. Bull case: $71.3 per share. Earnings stay at the fiscal 2025 level of $3.49 per share, supported by first-half fiscal 2026 net income of $141.9 million versus $108.9 million a year earlier and operating cash flow of $153.6 million versus $109.4 million, and the company opens 75 stores a year (the fiscal 2026 plan, backed by planned capital spending of $103 to $113 million) for eight years, reaching about 1,245 stores, with 15 years of flat earnings after that. What the shares appear to be worth: roughly $41 in the middle case, within a range of about $18 to $71. The margin-of-safety price is about $27, a discount of roughly 35% to the middle case, because value depends on continued new-store openings and on the closeout supply that feeds the stores. The main things that would prove us wrong on the downside are new stores earning less than existing ones (fiscal 2025 openings will show this as they mature) or supplier closeout availability or tariffs squeezing gross margin (40.5% in fiscal 2025). On the upside, our reference level of $2.22 is well below the fiscal 2025 result of $3.49, so if that result proves durable the shares are worth more than our middle case. Limits: we could not reconcile the fiscal 2016 cash flow to our build from the filings (a gap of about 10%) so that year is not included, and fiscal 2023 was a 53-week year.