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

Do you like to search for stocks that you believe are trading below their fair value? If so, you may identify with the term value investor. You may be interested in the screen below.

We began with the retail industry, and then searched for those stocks trading at the most significant discounts to their Graham Number, a measure of the stock's maximum fair value.

The Graham Number was created by the "godfather of value investing" Benjamin Graham. It is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

Interactive Chart: Press Play to compare changes in market cap 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 should be trading higher? Use this list as a starting point for your own analysis.

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. Diluted TTM earnings per share at 2.9, and a MRQ book value per share value at 16.13, implies a Graham Number fair value = sqrt(22.5*2.9*16.13) = $32.44. Based on the stock's price at $26.29, this implies a potential upside of 23.4% from current levels.

2. G-III Apparel Group, Ltd. (NASDAQ:GIII): Designs, manufactures, imports, and markets a range of outerwear and sportswear apparel to retailers primarily in the United States. Diluted TTM earnings per share at 2.83, and a MRQ book value per share value at 17.8, implies a Graham Number fair value = sqrt(22.5*2.83*17.8) = $33.67. Based on the stock's price at $26.47, this implies a potential upside of 27.19% from current levels.

3. hhgregg, Inc. (NYSE:HGG): Operates as a specialty retailer of consumer electronics, home appliances, and related services. Diluted TTM earnings per share at 1.08, and a MRQ book value per share value at 8.49, implies a Graham Number fair value = sqrt(22.5*1.08*8.49) = $14.36. Based on the stock's price at $11.95, this implies a potential upside of 20.2% from current levels.

4. Iconix Brand Group, Inc. (NASDAQ:ICON): Operates as a brand management company that engages in licensing, marketing, and providing trend direction for a portfolio of owned consumer brands. Diluted TTM earnings per share at 1.67, and a MRQ book value per share value at 16.36, implies a Graham Number fair value = sqrt(22.5*1.67*16.36) = $24.79. Based on the stock's price at $17.89, this implies a potential upside of 38.59% from current levels.

5. The Jones Group Inc. (NYSE:JNY): Engages in the design, marketing, and wholesale of apparel, footwear, and accessories in the United States and Canada. Diluted TTM earnings per share at 0.61, and a MRQ book value per share value at 13.45, implies a Graham Number fair value = sqrt(22.5*0.61*13.45) = $13.59. Based on the stock's price at $11.54, this implies a potential upside of 17.74% from current levels.

6. OfficeMax Incorporated (NYSE:OMX): Distributes business-to-business and retail office products. Diluted TTM earnings per share at 0.38, and a MRQ book value per share value at 6.27, implies a Graham Number fair value = sqrt(22.5*0.38*6.27) = $7.32. Based on the stock's price at $5.9, this implies a potential upside of 24.1% from current levels.

7. Shoe Carnival Inc. (NASDAQ:SCVL): Operates as a family footwear retailer. Diluted TTM earnings per share at 2.04, and a MRQ book value per share value at 21, implies a Graham Number fair value = sqrt(22.5*2.04*21) = $31.05. Based on the stock's price at $26.51, this implies a potential upside of 17.11% from current levels.

8. Stein Mart Inc. (NASDAQ:SMRT): Operates retail stores that offer fashion merchandise for women and men in the United States. Diluted TTM earnings per share at 0.44, and a MRQ book value per share value at 5.94, implies a Graham Number fair value = sqrt(22.5*0.44*5.94) = $7.67. Based on the stock's price at $6.31, this implies a potential upside of 21.53% from current levels.

*Short data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 8 Retail Stocks Undervalued By The Graham Number