Kohl's Gets It Right

I believe Kohl's share price, right now hovering around $75, can hit $100 in the next 12 to 18 months. That assumes there is no major fashion miss, which is always a risk with any retailer.

At $100, the stock would be trading at less than 26 times this year's expected earnings. Lehman's Drbul notes that over the past five years Kohl's stock has traded at an average of 30.9 times forward growth.

A 26 multiple would still have the stock in line with its peers on a price-earnings-to-growth basis. Both this year's expected profit as well as next year's projected EPS of $4.53 could prove conservative if Kohl's manages to continue to grow sales and improve margins.

Lastly, there is still room on board the bandwagon. Wall Street is divided on the name; 14 analysts rate the stock a buy, while 11 have a hold rating. If my prognosis proves true, some of those 11 likely will upgrade the stock, which could give shares an additional lift.

With a healthy balance sheet, talented management and a flourishing brand, Kohl's has emerged from a sleepy Midwest retailer to a big-time national player. While that's not exactly a secret on Wall Street, investors have not yet fully appreciated the potential in the stock.