Balanced Investing
Growth at reasonable price, mutual fund analyst

Fred's Inc.: Investor's Optimism About Industry Has Led To A Valuation Disconnect

The retail industry continued to experience growth despite the economic turmoil during 2008-09. The future of the retail industry seems quite attractive to me however Fred's Inc. (NASDAQ:FRED) will be among those few companies that will not be able to experience such high growth in revenues and cash flows. A wide network of other retailers in the industry and increasing trend of online shopping will create a hurdle for the company in achieving razor sharp growth in revenues and cash flows. I believe that the company will experience slow growth in revenues compared to its peers because of these factors. After incorporating these factors in the valuation, the intrinsic value of the stock is calculated to be $14.82

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