What follows is a list of consumer companies that are rated a "buy" or better on the Street and trade at forward earnings multiples below 13x. They cover a variety of industries: automobiles, toys, and specialty retailing. I find room for double-digit upside for all of the companies highlighted here. In my view, Mattel (NASDAQ:MAT) is the safest with its impressive dividend yield of 3.8% and 10% lower volatility than the broader market. All ratings are sourced from T1 Banker.
Ford is rated a "buy" on the Street and trades at a respective 2.5x and 7x past and forward earnings with a dividend yield of 1.6%.
Consensus estimates for Ford's EPS forecast that it will decline by 2.6% to $1.47 in 2012, and then turnaround to grow by 15.6% and 15.3% in the following two years. Assuming a multiple of 10x and a conservative 2013 EPS of $1.65, the rough intrinsic value of the stock is $16.50, implying 32.4% upside. Fourth-quarter results were soft despite pricing aggression. Pension pressures are also rising as the discount rate declines. Even still, the company is expected to realize a $1.8B net cash position by 2013. Since the company is 120% more volatile than the broader market, it has the potential to yield high risk-adjusted returns.
Mattel is rated near a "strong buy" on the Street and trades at a respective 15x and 12.5x past and forward earnings with a dividend yield of 3.8%.
Consensus estimates for Mattel's EPS forecast that it will grow by 10.1% to $2.40 in 2012 and then by 10.4% and 9.1% in the following two years. Assuming a multiple of 15x and a conservative 2013 EPS of $2.60, the rough intrinsic value of the stock is $41.60, implying 25.9% upside. Management has delivered excellent momentum across the top- and bottom-lines. The release of Batman, Superman, and Planes toys will help drive value skyward when a full recovery materializes.
Staples is rated a "buy" on the Street and trades at a respective 10.8x and 9.2x past and forward earnings with a dividend yield of 2.7%.
Consensus estimates for Staple's EPS forecast that it will grow by 8.7% to $1.50 in 2013 and then by 8.7% and 15.3% in the following two years. Assuming a multiple of 13x and a conservative 2013 EPS of $1.58, the rough intrinsic value of the stock is $20.54, implying 36.5% upside. Staples, as I speculated earlier, may consider purchasing Office Depot (NASDAQ:ODP) and OfficeMax (NYSE:OMX) in order to expand store count. The latter of these two plausible targets are rated near a "sell" and, in my view, are desperate for just that. Staples will be able to leverage its brand and higher-end market reputation to unlock revenue synergies in the process. Staples has differentiated itself by offering services, such as "Easy Tech," and increasing scale would build upon an already powerful brand.
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