Winn Dixie’s (NASDAQ:WINN) buyout the other day at a huge premium should encourage investors to look at other beaten down stocks in the supermarket space that could be next in line for a buyout at substantially higher prices. One stock I like in this area is Supervalu.
7 reasons why Supervalu (NYSE:SVU) is undervalued at $7.50 a share:
1. Several insiders have been buying shares in the last few months.
2. Supervalu is selling at the bottom of its five year valuation range based on P/E and P/S.
3. The company has significantly beat consensus earnings estimates each of the last three quarters.
4. SVU has been building a technical base over the last year at just under these levels (See Chart)
5. The stock has a forward PE of under 6 which is a 35% discount to its five year average.
6. SVU provides a generous yield of 4.7% which should continue to put a floor under the stock.
7. The Winn Dixie buyout should cause investors and activists to re-examine Supervalu’s stock. The market is assigning a value of a little over $3mm per store (which includes debt) to SVU, which seems much below replacement cost.
Disclosure: I am long SVU.