 |
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
  RSS FEEDS |
Retail hasn't been a great place to be the last year, and Sears Holding's (SHLD - commentary - Cramer's Take) drop from $190 in April to the recent low in the mid-$120s has only been palatable because we didn't own the stock. But from a technical perspective, the bottoming process is starting for this mass-merchant retailer. With that in mind, now is the time to be patient and wait for another drop before buying.
Fundamentally, SHLD is packing a lot of cash. As of the last earnings report, $17 per share is in cash and equivalents. Like a lot of the big-box retailers, SHLD's market cap is less than half its fourth-quarter trailing revenues. Thus, on a few metrics, the stock appears very cheap. Costco (COST - commentary - Cramer's Take), Wal-Mart (WMT - commentary - Cramer's Take) and SHLD always seem to trade at ridiculous "price to four-quarter-trailing revenue" valuations, something that is particular to the big-box, mass-merchant crowd, and I've always been puzzled by it. As of today, Sears is still trading below the August quarter's average stock repurchase price of $156. Finally, SHLD is now generating free cash flow ($1 billion in fourth-quarter-trailing free cash flow as of the August quarter), but like Walgreen (WAG - commentary - Cramer's Take), SHLD's free-cash-flow yield (free-cash-flow as a percentage of revenue) is just 1% to 2% and growing slowly. There is a lot of bad news cooked into this stock. Analyst estimates predict -7% EPS growth and -3% revenue growth in fiscal 2008. However, the technicals look much better, and on the weekly chart, SHLD is now more oversold than at any time since its recapitalization.Typically with a chart like SHLD, it will require more time to digest the 2007 drop, as it runs back up toward the 50-week moving average, but put it on the radar screen and bide your time.
At the time of publication, Gilmartin was long Costco and Walgreens, although positions may change at any time.Brian Gilmartin, CFA, founded Trinity Asset Management (TAM) in 1995, where he is currently a portfolio manager. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Gilmartin appreciates your feedback; click here to send him an email. 
Brokerage Partners
|
|||||||||||||||||||||||||||||||||||||||||||||
| Subscribe to our RSS Feed |
© 1996- TheStreet.com, Inc. All rights reserved. |
PODCASTS
