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In looking over the composition of my portfolio the other day, I noticed that I have a very small allocation made to the consumer discretionary sector. If the economy is indeed recovering, this needs to be corrected in order to take advantage of steady, and hopefully growing, consumer spending. Here are two retailers with low valuations and that are priced significantly under analysts' price targets.

Guess, Inc. (NYSE:GES) -

"Guess, Inc. designs, markets, distributes, and licenses lifestyle collections of apparel and accessories for men, women, and children. It offers collections of denim and cotton clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets, and knitwear". (Yahoo Finance)

4 reasons Guess is very cheap at under $29 a share:

  • The company has a pristine balance sheet with $4.50 a share in net cash on the books.
  • It has a forward PE of under 9, which is a 40% discount to its five year average. The stock also looks like it is bottoming (See Chart)

  • The mean analysts' price target on Guess is just under $39. It also yields 2.7%.
  • The stock is selling at the bottom of its five year valuation range based on P/B, P/E, P/S and P/CF.


Deckers Outdoor (NYSE:DECK) -

"Deckers Outdoor Corporation engages in the design, manufacture, and marketing of footwear and accessories for outdoor activities and casual lifestyle use to men, women, and children. The company offers luxury footwear and accessories under the UGG brand name; high performance multi-sport shoes, rugged outdoor footwear, and sport sandals under the Teva brand name". (Yahoo Finance)

4 reasons Deckers is a buy at $82 a share:

  • The company is rapidly increasing EPS. It made $4.03 in FY2010, and is expected to earn $5.03 in FY2011. Analysts have it notching $5.90 in EPS in FY2012.
  • The median analysts' price target on Deckers is $121. Credit Suisse has an "Outperform" rating and a $127 price target on DECK.
  • The company has grown earnings at more than a 28% annual clip over the last five years and now goes for just 1 times revenues.
  • The company has beat analysts' estimates for 12 straight quarters. The average beat over consensus the last four quarters has been 14%. It also has a five year projected PEG of under 1 (.84).
Source: 2 Retail Stocks On Sale