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Assessing Where Office Depot Stands After Its 2019 Numbers

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Individual Trader


  • Company posted impressive numbers in Q4.
  • The market remains unconvinced.
  • We look at forward guidance and how the key financials have been trending up to now.
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Office Depot (NASDAQ:ODP) came across our desk as a potential value play. The firm recently announced its fourth-quarter numbers where EPS of $0.12 beat consensus by $0.03 per share. Since that announcement, shares remain down at just above $2.43 per share. This means shares are presently trading with an attractive earnings multiple of 13.53. The downturn has also spiked the dividend yield to 4.12%.

Office Depot is transforming at present in an attempt to be much more predictable with respect to sustained growth. We know where management is coming from here. The financials, for example, over the past decade show negative earnings in 2010, 2012, 2013 and 2014. With respect to top-line sales, the firm is turning over approximately $1 billion less than it did a decade ago.

Where the firm has excelled though (which shareholders will hope will continue) is how operating costs specifically have come down in recent times. Whereas top-line sales have fallen by 8.5% since 2010, operating expenses have come down by approximately 36%. We saw once more on the fourth-quarter earnings call how management has gained momentum in this area. Management cited that its BAP (Business Acceleration Program) exceeded objectives for the year and as a result, delivered meaningful cost-savings which made themselves evident in the numbers.

It will be interesting to see if BAP can continue to improve operating performance for the firm. As investors, we would not like to depend on this happening for years on end, especially at the clip we witnessed in 2019.

What we need to see happen is sustained growth in the company's B2B businesses as well as its BSD division. Sustained sales growth specifically in these areas would significantly change the company's present valuation and reward shareholders as a result.

Therefore, on that note, let's see how the firm's 2019


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http://www.individualtrader.net/Investing & Trading Opportunist

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Comments (4)

I wish they would lower the dividend and use the delta to buy back stock. At this price, buying back stock is better for long term investors.
10 Mar. 2020
@nuclear @dude2000 @John Beardslee @Individual Trader Something Strange just happened. 7 ODP Officers (Gerry Smith included) sold ODP Stock on the same date. March 5 and 6. Another strange thing is that the stock kept its price without falling too much at that time (the DOW dropped much more)...They could sell at 2.28$ (All of them) On Mach 9 the stock lost 15% INSIDER TRADING? officedepot.gcs-web.com/...
2x ebitda, dont forget that..and will end 2020 with net cash..
Shangrila Value profile picture
Good FCF machine.
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