Retail Sales Are Out, Time For Investors To Go Shopping? Macy’s, Inc. (M)

Valuation

Kohl’s and Macy’s are very close when it comes to valuation, both trading at the bottom of the industry:

But with Macy’s earnings resilience and strong expected future growth, should it really trade in line with Kohl’s? The expected growth for Macy’s towers above that of Kohl’s, where EPS is expected to grow almost twice as fast for Macy’s:

Macy’s has been generating solid results, with January retail sales showing some of the best growth in the industry. Continued retail sales growth should allow Macy’s to repay debt, and return free cash to shareholders via dividend and share repurchases, where the company pays a 2% dividend yield. For the first three quarters of 2012, Macy’s generated some $889 million in cash flow from operations, which has allowed it to repurchase 10.3 million shares and pay out $246 million in dividends.

Macy’s is expected to generate $3.77 in earnings per share in 2014 (ending Jan.). Putting a peer average multiple of 12.5 (which is still on the low end in my opinion) on Wall Street’s 2014 EPS means possible upside of 18%.

The article Retail Sales Are Out, Time For Investors To Go Shopping? originally appeared on Fool.com and is written by Marshall Hargrave.

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