As an investor with a value bent, I have kept an eye on Kmart for years, but it is only now that I believe operational changes have generated sufficient traction to translate into meaningful earnings improvement.

Looking Up Kmart is a retailer with girth -- and growth potential.

Kmart reminds me of my December recommendation of JC Penney (JCP:NYSE - news - boards) (up 102% since then), in that it is a retailer with girth, needing only the right leadership to unlock hidden value. So much of business is incremental, because tiny changes in margins, for example, can lead to massive changes in valuation, often to the tune of billions of dollars.

That's one reason executive leadership is critical at companies such as Kmart and JC Penney. If management can sufficiently invigorate Kmart so that it can make, say, 2.5 cents per dollar of revenue instead of 1 cent, market value will balloon, at least doubling the current $4.8 billion value.

Early signs at JC Penney indicate CEO Allen Questrom has already initiated a turnaround. Similarly, new management at Kmart, led by dynamic CEO Charles Conaway, has put in place enough changes to dramatically improve company performance. In particular, I like Kmart's emphasis on customer service and capital management. And a new marketing flair is evident in the stores, led, in part, by the return of blue-light specials offered each hour.

So where does Kmart stock go from here? Most of my readers know that I care very little about the short term, as it is invariably poor for my companies anyway. Looking out one to three years, though, Kmart stock can easily climb as high as $25 if net profit margins eventually return to respectable levels of about 2.5% (key competitor Target, (TGT:NYSE - news - boards), is at 3.5%).

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