Is Ollie's Bargain Outlet (OLLI) Overvalued Despite Strong Growth?

The investment landscape for Ollie's Bargain Outlet Holdings (OLLI) presents a compelling paradox: a company with robust growth metrics and aggressive expansion plans trading at valuation multiples that starkly exceed industry benchmarks. This divergence between fundamentals and market expectations raises critical questions for investors. To assess whether OLLI is overvalued despite its strong performance, we must dissect its financial metrics, growth drivers, and the interplay between the two.

Valuation Metrics: A Tale of Expensive Multiples

OLLI's valuation metrics in 2025 paint a picture of a stock priced for perfection. Its Price-to-Earnings (P/E) ratio of 35.4x far outpaces the peer average of 17.8x and the Global Multiline Retail industry average of 20x according to Nasdaq data. Similarly, its Price-to-Sales (P/S) ratio of 3.09 is 150% above the industry average of 1.21 as reported by Intellectia, while its Enterprise Value/EBITDA (EV/EBITDA) of 23.95 exceeds the industry's historical average of 20.8x per Finbox analysis. These metrics suggest that the market is pricing in sustained, exceptional growth-growth that may or may not materialize.

Growth Drivers: The Case for Optimism

OLLI's bullish narrative is anchored in its aggressive store expansion, operational efficiency, and customer loyalty. The company plans to open 85 new stores in fiscal 2025, leveraging distressed retail real estate from the former Big Lots portfolio to rapidly scale its footprint. As of Q2 2025, OLLI operated 613 stores across 34 states, with 54 new stores added in the first half of the year alone. This expansion is complemented by strong comparable store sales growth of 5.0% in Q2 2025, driven by rising customer transactions and the Ollie's Army loyalty program, which now boasts 16.1 million members.

Financially, OLLI's ability to secure high-quality closeout inventory has fueled margin expansion. Gross margin increased by 200 basis points to 39.9% in Q2 2025, while full-year 2025 net sales guidance was raised to $2.631 billion to $2.644 billion. Management's long-term vision includes achieving a store base in the mid-800s, underpinned by its strategic acquisition of distressed real estate and a loyalty program driving 80% of sales.

Contrasting Narratives: Can Growth Justify the Valuation?

The tension between OLLI's expensive valuation and its growth trajectory hinges on two key questions: Is the company's growth sustainable, and does the market's optimism reflect realistic expectations? On one hand, OLLI's expansion into high-quality locations and its dominance in the off-price retail sector suggest a durable competitive advantage. Its ability to convert distressed assets into profitable stores-combined with a loyalty program that drives customer retention-positions it to capture market share in a fragmented industry according to Nasdaq analysis.

On the other hand, the valuation multiples imply that investors are pricing in a near-perfect execution of these plans. For instance, a P/E ratio of 35.4x requires not only continued margin expansion but also the assumption that OLLI can maintain its current growth rates indefinitely. Historical data from the retail sector shows that even successful companies often face margin compression or slowing growth as markets mature. Additionally, OLLI's reliance on closeout inventory exposes it to supply chain risks and inventory availability, which could constrain future performance.

Conclusion: A High-Stakes Bet

OLLI's investment case is a double-edged sword. The company's operational execution and strategic vision are undeniably strong, with revenue growth, margin expansion, and store expansion metrics that defy industry headwinds. Yet, its valuation metrics suggest that the market has already priced in a significant portion of these future gains. For investors, the critical consideration is whether OLLI's growth trajectory is not only achievable but also defensible against potential disruptions.

In the end, OLLI's valuation may not be inherently "overvalued" if its growth continues to outpace expectations. However, the narrow margin of safety embedded in its multiples means that any misstep-whether in inventory sourcing, store productivity, or customer retention-could lead to a sharp repricing. For risk-averse investors, the current valuation may warrant caution. For those willing to bet on OLLI's ability to execute flawlessly, the rewards could be substantial-but the risks are equally pronounced.