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If you consider yourself a value investor, you may be interested in this list.

We ran a screen on the retail industry for stocks trading at significant discounts to their Graham Number, potentially indicating that they are undervalued.

The Graham Number is a measure of a stock’s maximum fair value, and it only requires two data points: Current earnings per share and current book value per share. 
The Graham Number = Square Root of (22.5) x (TTM Earnings per Share) x (MRQ Book Value per Share). 

This equation assumes that a stock is overvalued if P/E is over 15 or P/BV is over 1.5. Stocks trading at a significant discount to their Graham number may be undervalued.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬


We also created a price-weighted index of the stocks mentioned below and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Click to enlarge

Do you think these stocks are undervalued? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by Graham number.

1. Stage Stores Inc. (NYSE:SSI): Operates as a specialty department store retailer that offers branded and private label apparel, accessories, cosmetics and footwear for women, men and children in the United States. Market cap of $387.32M. TTM Diluted EPS at $0.96, MRQ Book Value Per Share at $13.15, Graham number at $16.85 (vs. current price at $12.82, implies a potential upside of 31.46%). The stock is a short squeeze candidate, with a short float at 14.87% (equivalent to 11.73 days of average volume). It has been a rough couple of days for the stock, losing 12.32% over the last week.

2. Staples, Inc. (NASDAQ:SPLS): Operates as an office products company. Market cap of $9.79B. TTM Diluted EPS at $1.37, MRQ Book Value Per Share at $10.24, Graham number at $17.77 (vs. current price at $14.10, implies a potential upside of 26.0%). Might be undervalued at current levels, with a PEG ratio at 0.79, and P/FCF ratio at 11.42. It has been a rough couple of days for the stock, losing 8.91% over the last week.

3. Best Buy Co. Inc. (NYSE:BBY): Operates as a retailer of consumer electronics, home office products, entertainment products, appliances and related services primarily in the United States, Europe, Canada and China. Market cap of $9.57B. TTM Diluted EPS at $2.99, MRQ Book Value Per Share at $16.65, Graham number at $33.47 (vs. current price at $27.06, implies a potential upside of 23.68%). The stock is a short squeeze candidate, with a short float at 11.93% (equivalent to 5.12 days of average volume). The stock has lost 39.9% over the last year.

4. Titan Machinery, Inc. (NASDAQ:TITN): Operates a network of full service agricultural and construction equipment stores in the United States. Market cap of $413.55M. TTM Diluted EPS at $1.67, MRQ Book Value Per Share at $15.03, Graham number at $23.76 (vs. current price at $20.14, implies a potential upside of 18.0%). It has been a rough couple of days for the stock, losing 10.79% over the last week.

5. RadioShack Corp. (NYSE:RSH): Engages in the retail sale of consumer electronic goods and services through its RadioShack store chain and kiosk operations. Market cap of $1.16B. TTM Diluted EPS at $1.11, MRQ Book Value Per Share at $8.01, Graham number at $14.14 (vs. current price at $12.06, implies a potential upside of 17.28%). Offers a good dividend, and appears to have good liquidity to back it up - dividend yield at 4.29%, current ratio at 2.82, and quick ratio at 1.59. It has been a rough couple of days for the stock, losing 10.73% over the last week.

6. Brown Shoe Co. Inc. (NYSE:BWS): Operates as a footwear retailer and wholesaler primarily in the United States, Canada, China and Guam. Market cap of $357.58M. TTM Diluted EPS at $0.48, MRQ Book Value Per Share at $9.29, Graham number at $10.02 (vs. current price at $8.65, implies a potential upside of 15.80%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.08). The stock is a short squeeze candidate, with a short float at 26.02% (equivalent to 12.05 days of average volume). The stock has lost 28.16% over the last year.

7. Jarden Corp. (NYSE:JAH): Distributes consumer products worldwide. Market cap of $2.70B. TTM Diluted EPS at $2.58, MRQ Book Value Per Share at $21.05, Graham number at $34.96 (vs. current price at $30.39, implies a potential upside of 15.03%). The stock has lost 6.07% over the last year.

*EPS and BVPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 7 Retail Stocks Deeply Undervalued By The Graham Number