Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message|
( followers)  

Interested in finding stocks that may be trading below their fair value? If so, here are some ideas to get you started on your search.

We ran a screen on the retail industry for stocks with the highest ratios of levered free cash flow/enterprise value, potentially indicating that they are undervalued.

Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm's value from all ownership sources: market cap, outstanding debt, and preferred shares. Companies with high ratios of levered free cash flow/enterprise value may be undervalued by the market.

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.

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

List sorted by LFCF/EV.

1. 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 $8.77B. Levered free cash flow/enterprise value at 24.32% (levered free cash flow at $2.16B and enterprise value at $8.88B). The stock is a short squeeze candidate, with a short float at 13.31% (equivalent to 5.61 days of average volume). The stock has lost 26.82% over the last year.

2. GameStop Corp. (NYSE:GME): Operates as a retailer of video game products and personal computer entertainment software. Market cap of $3.37B. Levered free cash flow/enterprise value at 20.81% (levered free cash flow at $636.65M and enterprise value at $3.06B). The stock is a short squeeze candidate, with a short float at 29.66% (equivalent to 12.22 days of average volume). The stock has gained 17.4% over the last year.

3. 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 $1.0B. Levered free cash flow/enterprise value at 20.61% (levered free cash flow at $214.39M and enterprise value at $1.04B). Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 4.99%, current ratio at 2.82, and quick ratio at 1.59. The stock is a short squeeze candidate, with a short float at 14.98% (equivalent to 5.34 days of average volume). The stock has lost 32.68% over the last year.

4. Movado Group, Inc. (NYSE:MOV): Designs, sources, markets, and distributes fine watches and jewelry. Market cap of $463.14M. Levered free cash flow/enterprise value at 17.50% (levered free cash flow at $55.37M and enterprise value at $316.40M). The stock has gained 26.19% over the last year.

5. Stein Mart Inc. (NASDAQ:SMRT): Operates retail stores that offer fashion merchandise for women and men in the United States. Market cap of $318.20M. Levered free cash flow/enterprise value at 16.90% (levered free cash flow at $34.96M and enterprise value at $206.82M). This is a risky stock that is significantly more volatile than the overall market (beta = 2.47). The stock has had a couple of great days, gaining 9.25% over the last week.

6. Charming Shoppes Inc. (NASDAQ:CHRS): Operates as a specialty apparel retailer primarily for women in the United States. Market cap of $573.33M. Levered free cash flow/enterprise value at 15.0% (levered free cash flow at $83.26M and enterprise value at $555.18M). This is a risky stock that is significantly more volatile than the overall market (beta = 3.42). The stock is a short squeeze candidate, with a short float at 11.95% (equivalent to 6. days of average volume). The stock has gained 58.71% over the last year.

7. Sotheby's (NYSE:BID): An auctioneer of various properties including fine art, antiques, decorative art, jewelry, and collectibles. Market cap of $2.29B. Levered free cash flow/enterprise value at 14.39% (levered free cash flow at $322.27M and enterprise value at $2.24B). This is a risky stock that is significantly more volatile than the overall market (beta = 2.35). The stock has had a good month, gaining 17.06%.

8. Barnes & Noble, Inc. (NYSE:BKS): Operates as a content, commerce, and technology company in the United States. Market cap of $720.35M. Levered free cash flow/enterprise value at 14.29% (levered free cash flow at $157.18M and enterprise value at $1.10B). The stock is a short squeeze candidate, with a short float at 49.84% (equivalent to 8.3 days of average volume). The stock has performed poorly over the last month, losing 17.16%.

9. Inergy, L.P. (NRGY): Engages in the retail marketing, sale, and distribution of propane to residential, commercial, industrial, and agricultural customers in the United States. Market cap of $2.98B. Levered free cash flow/enterprise value at 12.89% (levered free cash flow at $586.69M and enterprise value at $4.55B). The stock has lost 38.98% over the last year.

10. United Online, Inc. (NASDAQ:UNTD): Provides consumer products and services over the Internet, primarily in the United States and internationally. Market cap of $503.81M. Levered free cash flow/enterprise value at 12.20% (levered free cash flow at $78.52M and enterprise value at $643.72M). The stock is a short squeeze candidate, with a short float at 7.48% (equivalent to 8.68 days of average volume). The stock has lost 16.54% over the last year.

*LFCF/EV data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 10 Retail Stocks Undervalued By Levered Free Cash Flows