With shares of Macy’s (NYSE:M) trading at around $48.12, is M an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
According to Alexa.com, Macys.com is ranked No. 611 in the world and No. 130 in the United States. In other words, only 129 websites in the United States receive more traffic than Macys.com. This is impressive. However, the past three months have left a lot to be desired. Over that time frame, pageviews-per-user has declined 8.58 percent to 6.50, time-on-site has declined 3 percent to 6:55, and the bounce rate (only one pageview per visit) has increased 8 percent to 23.3 percent. This could indicate poor online sales for the quarter, but that can’t be guaranteed. The good news is that despite the recent declines, the overall numbers are still good. Not many websites, regardless of the industry, have a pageview-per-user average of 6.50, a time-on-site of 6:55, and a bounce rate as low as 23.3 percent. That said, the following paragraph reveals information that is even more incredible, but it doesn’t directly relate to Macy’s.
J.C. Penney (NYSE:JCP) has been very unpopular as of late. For example, the short position is a whopping 25.90 percent. Jcpenney.com also isn’t as popular as Macys.com. It has a global rank of 964 and a domestic rank of 185. And the past three months haven’t been impressive. Pageviews-per-user has declined 0.60 percent, time-on-site has increased 2 percent, and the bounce rate has increased 7 percent. However, the overall numbers are superb for an online retailer. For example, pageview-per-user average is 9.92, time-on-site average is 7:25, and the bounce rate is only 20.7 percent. Therefore, visitors are viewing many pages and staying on the site for a long time. This increases the potential for sales.
As far as Dillard’s (NYSE:DDS) goes, its global rank is 5,485 and its domestic rank is 1,165. Over the past three months, pageviews-per-user has declined 7.07 percent to 8.15, time-on-site has declined 6 percent to 5:35, and the bounce rate has increased 4 percent to 22.7 percent.
On an overall basis, Macy’s has been operating efficiently. It has cut costs, focused on price optimization, and integrated operations. My Macy’s has also allowed for products to cater to local demand. This program has been a success. Furthermore, 500 stores will be capable of fulfilling online orders this year, which is up from just 23 stores in 2011.
Macy’s is currently trading at 14 times earnings, which makes valuation fair. Management has stated that it expects sales to slow in the second quarter prior to picking up in the second half of the year. Management expects FY2013 EPS of $3.90-$3.95.
Let’s take a look at some more important numbers prior to forming an opinion on this stock.
T = Technicals Are Strong
Macy’s has been a strong and steady performer over the past three years.
|1 Month||Year-To-Date||1 Year||3 Year|
At $48.12, Macy’s is trading above its averages.
E = Equity to Debt Ratio Is Weak
The debt-to-equity ratio for Macy’s is weaker than the industry average of 0.70. However, Macy’s should improve in this area going forward.
E = Earnings Have Been Strong
Earnings have consistently improved on an annual basis. This trend is likely to continue.
|Revenue ($) in millions||24,892||23,489||25,003||26,405||27,686|
|Diluted EPS ($)||0.66||0.83||1.98||2.92||3.24|
Looking at the last quarter on a year-over-year basis, revenue increased 4 percent, and earnings improved 19.90 percent.
|Quarter||Apr. 30, 2012||Jul. 31, 2012||Oct. 31, 2012||Jan. 31, 2013||Apr. 30, 2013|
|Revenue ($) in millions||6,143||6,118||6,075||9,350||6,387|
|Diluted EPS ($)||0.43||0.67||0.36||1.83||0.55|
Now let’s take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
Macy’s online performance over the past three months hasn’t been good. However, management has been making a lot of wise moves that should lead to investor rewards. While Macy’s wouldn’t be capable of withstanding a severe stock market correction, it’s one of the most well-run retailers in the industry. That being the case, as long the broader market holds, Macy’s should perform well. This is in addition to a generous 2.10 percent yield.
Macy’s is an OUTPERFORM.
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All content posted should not be considered professional advice. Please do your own research and consult with a professional financial advisor before making any investment decisions. I don’t have any positions in this stock.