Staples (SPLS) is one of the few retailing stocks in my portfolio. The stock unfortunately has been a laggard in 2012 so far. However, it looks like it has found a nice floor at current price levels and it is supported by a solid dividend yield. It also should benefit by the continuing struggles of its two major competitors and looks like a compelling value for long term investors.
6 reasons is a solid bargain for long term value and income investors at under $13 a share:
- The stock has a generous yield of 3.5% and has grown its dividend payouts at roughly an 8% annual rate since the end of the financial crisis.
- The stock is selling the very bottom of its five year valuation range based on P/E, P/S, P/CF and P/B.
- The company has a much better balance sheet and operating margins than its two biggest competitors, Office Depot (ODP) and OfficeMax (OMX).
- Staples is going for less than 8 times forward earnings, a sharp discount to its five year average (14.4).
- The median analysts' price target on SPLS by the 16 analysts that cover the stock is $16.50. S&P has a "Buy" rating and an $18 price target on the company.
- SPLS is selling at price levels it has bounced off of over the past year (see chart).
(Click to enlarge)
Disclosure: I am long SPLS.
