Dick's Sporting Goods (DKS) is set to have more "sustainable" earnings growth in the future compared with the past, and this hasn't been fully reflected in its stock price, UBS said in a note Wednesday.

Analysts, including Michael Lasser, said they expect earnings growth of over 8% in the next five years, compared to an average of 5% growth in the five years before the pandemic. Recent improvements in the company should lead to higher margins, better cash flow, and stronger returns moving forward.

The company will achieve sustainable growth by leveraging its strong competitive position to expand its ecosystem, including adding over 50 new flagship locations in the coming years. Additionally, the company has built flexibility into its cost structure, helping support its profitability, the analysts said, adding that with consistent outperformance, the market is likely to reward the company with a higher valuation than its current average. Meanwhile, its 5% free cash flow yield provides downside protection.

The analysts said that they increased their multiple and price target due to higher growth projections, greater confidence in the company's market share gains, and its ability to manage operating margins.

UBS upgraded Dick's Sporting Goods to buy from neutral and raised its price target to $260 from $225.

Price: 213.54, Change: +1.32, Percent Change: +0.62