NEW YORK (TheStreet) -- Hunting and fishing retailer Cabela's (CAB) has grown across America with its large, destination stores. The additional stores and strong sales per square foot have delivered exceptional returns to patient shareholders. With the company's increased prospects for a hunting and fishing mecca like Canada, investors will continue to be pleased.

For years, Canada's hunting and fishing market has been dominated by small mom and pop shops and catalog sales. Cabela's and privately-held Bass Pro Shops have seen the opportunity and both have aggressive plans to expand in the country. Bass Pro Shops has two Canadian stores, with plans for four more.

Cabela's recently opened its sixth Canadian store with its first Ontario location. From 2007 to 2013, Cabela's took the slow approach to test the Canadian market with a total of four stores. That figure will double by the end of 2014 to eight and will hit double digits by the end of 2015.

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Cabela's will face competition from an existing Canadian chain that already recognized the opportunity. Canadian Tire (CDNAF) opened proshops in its stores with hunting and fishing items available in hundreds of locations nationwide. Canadian Tire has the advantage of having locations within 15 minutes of 90% of the Canadian population.

Of course, Cabela's has been able to compete in the U.S. with its large destination stores and that's what it will do in Canada. In fact, the Canadian Tire expansion should show that there is a clear demand for hunting and fishing products if the retailer is willing to redo its store designs to capture additional sales.

In 2014, Cabela's will open three stores in Canada. The following three years each have two scheduled openings for Canada. The stores will range from 50,000 to 70,000 square feet, slightly smaller than most of its American stores. Canadian Tire has 6000 square feet committed to pro shops in some stores. Cabela's will be able to offer a much wider selection and its growing namesake brands.

During a recent investor day, Cabela's highlighted retail growth in Canada as a strong point. A relocated Winnipeg store saw a 50% increase in sales per square foot. A new distribution center built in Canada also increased square footage of inventory by 98%.

Cabela's doesn't need to dominate the Canadian market to succeed in its market. In the U.S. Cabela's estimates it has a 4.3% market share of the addressable market. Wal-Mart Stores (WMT) - Get Report, due to its size and scale, has 15.6% of the $50 billion market. Cabela's does rank ahead of Bass Pro Shops (3.5%).

The expansion in Canada comes at a good time as declining gun sales in the U.S. have ripped revenue. In the first quarter, same store sales fell 21.7%, due to comparables versus last year's strong gun and ammo sales season. Excluding, firearms and ammunition, same store sales decreased 8.5%. The winter weather and long season was also blamed for weakened sales.

For the full year, Cabela's expects low double digit earnings per share growth. Revenue is expected to increase at a high single digit rate. Analysts currently expect revenue and earnings to both grow at around 7%. If Cabela's can turn in a sales rebound and open all 14 2014 expected stores, investors should see a revenue and earnings beat for the full fiscal year.

Shares of Cabela's trade with cheap valuations and are relatively close to peers. Despite Cabela's shares rising 56% in 2013, shares are still cheap. On a price to sales basis, shares trade at 1.2 and 1.0 times current and next fiscal year expected revenue respectively. On a price to earnings ratio, shares trade at 17.7 and 14.9 respectively for the current and next fiscal year.

Rival Dick's Sporting Goods (DKS) - Get Report trades at a current 0.9 price to sales and 16.9 times earnings. Going forward, the large sporting goods store trades at 0.8 times expected sales and 14.8 times earnings. Dick's of course has more than 500 stores in 46 states and is growing nowhere near Cabela's pace.

At the time of publication, the author held no positions in any of the stocks mentioned.

Follow Chris on Twitter @chriskatje

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates CABELAS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CABELAS INC (CAB) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 43.79% is the gross profit margin for CABELAS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.54% trails the industry average.
  • CABELAS INC's earnings per share declined by 48.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CABELAS INC increased its bottom line by earning $3.14 versus $2.42 in the prior year. This year, the market expects an improvement in earnings ($3.58 versus $3.14).
  • CAB, with its decline in revenue, slightly underperformed the industry average of 1.4%. Since the same quarter one year prior, revenues slightly dropped by 9.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The debt-to-equity ratio is very high at 2.57 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.76, which shows the ability to cover short-term cash needs.