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Do you consider yourself a value investor, always looking for underestimated and potentially undervalued stocks? With this idea in mind, we ran a screen.

We began by screening the retail industry for stocks that appear undervalued relative to earnings growth, with PEG below 1.

We then screened for those that also appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value 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.

(click to enlarge)

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

1. Staples, Inc. (SPLS): Operates as an office products company. Market cap at $9.37B, most recent closing price at $13.60. PEG at 0.9. Diluted TTM earnings per share at 1.39, and a MRQ book value per share value at 10.27, implies a Graham Number fair value = sqrt(22.5*1.39*10.27) = $17.92. Based on the stock's price at $13.07, this implies a potential upside of 37.12% from current levels.

2. G-III Apparel Group, Ltd. (GIII): Designs, manufactures, imports, and markets a range of outerwear and sportswear apparel to retailers primarily in the United States. Market cap at $508.24M, most recent closing price at $25.45. PEG at 0.59. Diluted TTM earnings per share at 2.46, and a MRQ book value per share value at 18.09, implies a Graham Number fair value = sqrt(22.5*2.46*18.09) = $31.64. Based on the stock's price at $24.08, this implies a potential upside of 31.41% from current levels.

3. EZCORP, Inc. (EZPW): Provides credit services to people who lack the cash or access to credit to meet short-term needs. Market cap at $1.24B, most recent closing price at $24.40. PEG at 0.59. Diluted TTM earnings per share at 2.76, and a MRQ book value per share value at 14.83, implies a Graham Number fair value = sqrt(22.5*2.76*14.83) = $30.35. Based on the stock's price at $23.77, this implies a potential upside of 27.67% from current levels.

4. Guess' Inc. (GES): Engages in the design, marketing, distribution, and licensing of apparel and accessories for men, women, and children. Market cap at $2.46B, most recent closing price at $27.35. PEG at 0.84. Diluted TTM earnings per share at 2.86, and a MRQ book value per share value at 13.12, implies a Graham Number fair value = sqrt(22.5*2.86*13.12) = $29.06. Based on the stock's price at $24.51, this implies a potential upside of 18.55% from current levels.

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

Source: 4 Retail Stocks Undervalued By Earnings Growth And The Graham Number