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But over time, cost cutting will slow and profit growth will again be dependent on sales growth. And sales growth, in turn, will depend -- at least in part -- on the economy. While the company says the Sept. 11 terror had a big impact on the third quarter, Office Depot's announcement last week that same-store sales in the third quarter would decline 7% to 8% felt more symptomatic of general economic weakness. Prior to Sept. 11, estimates suggested same-store sales would slip 4% to 5% for the quarter.

Given economic uncertainties, it's hard to envision a scenario where Office Depot's retail sales will come roaring back before next year. And while commercial sales and international outlets provide opportunities for the company, a strong dollar and softness in commercial accounts could challenge growth in those segments.

None of this means that Office Depot is a poor company. In fact, it's a good company with management that has done a yeoman's job of steering a profitable course. But the Street has already recognized that.

Office Depot stock -- which was trading at just under $7 in January, or about 10 times this year's earnings -- is now trading at $15.20, or about 21 times this year's number. And with 2002 earnings growth estimated at about 15%, the stock trades at 18 times next year's estimates. While not overly rich, Office Depot isn't the value it was in January. That's especially true if your economic recovery scenario is on the conservative end of the spectrum.

Back in January, Arne suggested a fair price for Office Depot was $12 to $18. Given the improvements in the company offset against the uncertain economy, that still seems about right to me. That suggests the current upside is roughly equal to the downside. While that doesn't make me a bull, it also doesn't make me a bear. Call me agnostic.

Reaction to Thursday's upgrade from Merrill Lynch shows momentum players like the stock, so over the short term, the stock could push the top end of that range. But a sustained breakout above those levels requires an improvement in revenue that isn't likely in the current economy.

To look at it another way, if I'm going to own one of the players in the office supplies market, I'd own the Depot. It's cheaper than Staples (SPLS:Nasdaq - news - commentary - research - analysis) and a big step above Office Max (OMX:NYSE - news - commentary - research - analysis).

That said, this train left the depot in January, just like Arne called it. If you were on board then, congratulations. If you weren't and are looking to jump aboard, understand the next 100% gain will be much more taxing.

Who won today's Face-Off? Arne Alsin Chris Edmonds See Results