Change the Channels on RadioShack

It's admirable that management has gotten their hands around costs. But for now, sales stink. In fact, the recent period marked the first time since 1999 that RadioShack failed to log $1 billion in revenue in the first quarter.

With the better operational results, if RadioShack can actually get people to buy what they're selling, the bottom line could improve dramatically.

I usually like this kind of story -- one in which there is evidence of change -- but the rest of Wall Street is not on board. Only three analysts rate the stock a buy, while 12 have it at hold and seven recommend selling it.

Thus this should be a great contrarian pick. But there are two issues.

First, there's no reason to believe that the company's sales are about to turn around. There is nothing exciting in or about the stores to attract consumers.

The Onion recently spoofed RadioShack's business model. And while no one will confuse the satirical analysis of The Onion with that of the fine writers and contributors of TheStreet.com, there is some truth behind the jokes.

The second major concern is valuation. Shares of RadioShack have surged a whopping 65% since the beginning of the year.

With the stock's additional 7% jump Monday, investors have to pay a premium to own this potential turnaround story. RadioShack trades at 26 times forward earnings compared with just 15 times earnings at category leader Best Buy (BBY Quote - Cramer on BBY - Stock Picks) and the industry average of 22.

The stock also trades at much higher multiples than its peers based on other metrics. The table below, which compares metrics I calculated using Thomson Financial data, shows just how expensive RadioShack is on a relative basis.

A Pricey Shack The retailer trades at much higher multiples than its peers
	Forward Price-to-Earnings Ratio	Price to Earnings to Growth	Price to Book	Price to Sales	Price to Cash Flow
RadioShack	26	2.7	5.8	0.8	16.4
Category Average*	22	1.6	3.7	0.7	13.4
*Category consists of Best Buy (BBY), Circuit City (CC), GameStop (GME) and RadioShack (RSH).

I can't think of a reason why this stock should be trading at a premium to Best Buy, GameStop (GME Quote - Cramer on GME - Stock Picks), or any other retailer for that matter. Assigning a category average multiple across various metrics, I come up with a price target of $21.

Perhaps someday RadioShack's revenue skid will be over. But until then, do something that RadioShack can't: Sell.

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