The Turnaround Story Continues: Best Buy Co., Inc. (BBY)

Is Best Buy still a value?

At $12 per share Best Buy Co., Inc. (NYSE:BBY) was insanely underpriced. And I’m not just someone saying that in hindsight – I put my money where my mouth is and bought shares. Now, at $20 per share, the stock is still underpriced. It trades at around 5 times owner earnings with very little net debt, and on top of that pays a dividend yield of 3.4%. It’s hard to say exactly how much the stock is worth, but it’s certainly more than $20 per share.

A different turnaround

People are quick to compare Best Buy Co., Inc. (NYSE:BBY) to other retailers which are attempting a turnaround, namely RadioShack Corporation (NYSE:RSH) and J.C. Penney Company, Inc. (NYSE:JCP). All three companies are deemed irrelevant by detractors, usually citing online competition. But Best Buy stands out from this group.

I’d be willing to bet that if you went out and asked 100 people what RadioShack sold many of them would respond with “cables” or have no idea at all. If you ask a younger person they may not even know what RadioShack is. RadioShack mainly sells mobile devices and plans in exactly the same way that Best Buy does. RadioShack is also unprofitable and had less revenue in 2012 than it did in 2003.

J.C. Penney, while not in the same industry, is a nationwide retail store just like Best Buy. The difference, though, is that there are plenty of nationwide clothing stores which sell the same products that J.C. Penney sells. There is absolutely nothing special about the company. Best Buy, however, is the only nationwide consumer electronics store. Sure, there’s Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT), but if you want any chance of decent customer service Best Buy is your best option.

The bottom line

Even after the run-up in stock price Best Buy Co., Inc. (NYSE:BBY) is still undervalued. Unlike the turnaround efforts of RadioShack and J.C. Penney, Best Buy has remained profitable, and with management focusing on cutting costs the company should be set up for long term success.

The article The Turnaround Story Continues originally appeared on Fool.com and is written by Timothy Green.

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