Macy's (NYSE:M) is perhaps one of the most iconic American department stores. At current valuations, it may also shape up as a good investment.
Reasons to give Macy's a closer look:
- Macy's is trading at a trailing P/E of 11.6 and a forward P/E of 9.7, which represent a 32% and 20% discount to five year averages respectively. Forward PEG is 0.8, suggesting future growth is not priced into shares. Price/cash flow, at 6.05, is significantly lower than the multiline retail industry average of 10.71.
- Multiline retail has been punished as of late, with TTM EPS growth at a staggering NEGATIVE 249%. However, Macy's recorded a 37% growth in EPS over the same period.
- Macy's has beaten earnings estimates for twelve consecutive quarters.
- Reports from Michigan suggest that retail strength may be improving. This was confirmed by retailer Hennes & Mauritz's recent earnings report, which cited sales strength in the US.
- Macy's offers a 2.4% dividend.
- Analyst consensus is bullish. Of 19 analysts covering Macy's, 4 have a "strong buy" rating, 8 have a "buy" rating, 6 have a "hold" rating, and only 1 has a "reduce" rating.
- Analyst price targets suggest most of the downside is priced in already: the lowest target is $35, which represents a very slight premium to current prices. The high target is $51 and the mean is $43.40, representing an upside of about 26%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.