Enough is enough. Shares of Dicks Sporting Goods (DKS) have hurt their holders substantially over this year losing over 25% over the twelve-month period: (Source: Google Finance) This may as well be the end of the downfall. What is interesting is that there is no apparent reason for the valuation to drop: the company keeps growing revenues (three-year CAGR of 9%) and getting those free cash flows intact: (Source: Capital IQ) We see that the problem is not in the faltering profitability. I do not know what the problem with the valuation is but, as long is does not have anything to do with the financials or the business model, I do not care. There seems to have been a case of a multiple contraction over the past eight quarters: (Source: Capital IQ) B. Riley & Co's analyst Mitch Kummetz implies that the contraction is a result of the company's lagging behind its financial goals for fiscal 2017, as evident by sales and EPS growth. However, the analyst suggests that the Golf segment will not be a drag for the company anymore, and cost savings may come from "the transition of e-commerce to the in-house platform" (Source: Benzinga). As a result, he expects that further downside is limited. I also think it is limited based on the comparative analysis: (Source: Capital IQ) Evidently, Dicks Sporting Goods is valued at a discount to peers unfairly given its quite decent operating performance: (Source: Capital IQ) The company's margins are not impressive when compared to the group but the revenue and EBITDA growth rates are beyond reproach. Either way, the company is already cheap. There have been talks that Cabela's International, a competitor of Dicks Sporting Goods (marked as orange on the above list), is undergoing a strategic review and may be a good M&A match for the company. "A potential acquisition by Dick's Sporting Goods could prove “highly accretive,” depending on the mix of debt and equity used to finance the transaction, analyst Joseph Feldman of Telsey Advisory said (Source: Benzinga). As can be seen in the picture above, the two companies have similar economics but Cabela's has posted a decline in the top line for the last twelve months. The analyst suggests that Cabela's has a complimentary product mix, and both companies have location in the same or similar geographies. He also thinks that Dicks Sporting Goods will need to pay about $4.9B to buy Cabela's out, $4.3B of which will be Cabela's debt that the buyer will need to assume. Currently, the potential buyer has a D/E ratio of only 0.2x, while after the acquisition the ratio will climb to about 2.0x, according to my calculations. In my opinion, this sounds too risky, although I have not checked the debt and leverage ratios for the entire industry. I am almost certain that the combined company will have an ideal business mix but I am worried about the financial side of the hypothetical deal. Overall, I believe that now is a good time to buy shares of Dicks Sporting Goods. The company is financially sound and growing, while M&A rumors, depending on the details, may fuel share price acceleration in the short-term. Analysts give the stock a price target of $50 per share (a ~33% upside opportunity). I cannot provide my own numbers on the company because I have not run them yet. However, this seems to me a good mid-term target, given that the 52-week high was above $60 per share. In other words, the stock can definitely reach the levels - all the company needs to do is to keep posting good operating and financial results on a quarterly basis to prove the market wrong.