NEW YORK (TheStreet) -- Even as the broader market trades at near all-time highs, bargain hunters don't need to look too far to find cheap stocks. Although the retail sector has been punished recently -- in part due to April's retail data, which indicated that consumers didn't spend much of their so-called "gas tax credit" -- Best Buy (BBY) now looks like a solid contrarian play.
The business conditions for the Richfield, Minnesota-based electronics retailer are not as bad as its stock price indicate. It seems the market has quickly forgotten that Best Buy's fourth-quarter earnings results demonstrated that some of its struggles are now in the past. So for investors looking to outsmart the market, here's your chance.
Best Buy, trading at just nine times earnings and down roughly 9% year-to-date, has become a great buying opportunity ahead of the company's first-quarter fiscal 2016 earnings results due out Thursday before the opening bell. The shares appear unwanted and unloved.
With BBY trading at a P/E that is 12 points lower than the S&P 500's average of 21), it is -- to borrow a phrase from Carl Icahn -- a "no-brainer". Consider this: If Best Buy were valued on par with the rest of the market, the stock would trade today at around $55, not $35. (That's based on its year-ago earnings of $2.60 per share, and multiplying by a P/E of 21.)
Or, if Best Buy was valued on par with the narrower SPDR S&P Retail ETF (XRT), which focuses only on that sector and has an average P/E of 20, the stock would trade around $52 per share, or 48% higher.