We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
4 Retail Stocks with Great Value & Earnings Growth Potential
Read MoreHide Full Article
“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett
The strategy is quite simple – find stocks that are trading below their inherent worth. An investment decision based on the intrinsic value of stocks seems feasible in an economy, which just witnessed a hike in interest rates, encountered softness in the pace of construction and factory output last month, and saw oil prices lose more ground yesterday.
In today’s discussion, we are focusing on the Retail-Wholesale sector, which is in the bottom 13% of the Zacks Sector Rank (14 out of 16). But before zeroing on a strategy and looking for lucrative counters to bet your bucks, let’s take a sneak peek into what’s going on in the sector.
Changing Dynamics of Retail
The retail sector has been undergoing a fundamental change. With a digital transformation in shopping and consumers splurging online, store and mall traffic has been hit hard. As a result, most retailers, including big-box, are struggling to compete with e-commerce channels and are being forced to trim their store count to focus more on an online model.
We note that retail sales in May recorded the steepest drop in 16 months, reflecting a scenario where consumers are curtailing their spending. This raises doubts as to whether economic growth has somewhat tempered in the current quarter. The dismal sales report comes on the heels of soft job addition witnessed last month. (Read: Will Soft May Retail Sales Make Investors Revisit Portfolio?)
Nevertheless, the sector still holds some promise, given the favorable economic indicators. We note that so far in the year, the sector has registered an increase of 13.2% compared with the S&P 500 that was up roughly 8.9%. The rebound in oil prices from all-time lows, decelerating unemployment rate, and a gradual improvement in the housing market signal that the economy is on a recovery mode. These factors are playing a crucial role in raising consumers’ confidence. We expect this positive sentiment to translate into higher consumer spending.
Thus, adding a few stocks from the space would be a prudent decision at the current juncture. We suggest investing in top-ranked stocks with a good value score and solid earnings growth potential.
Here’s the Ideal Strategy
Investment in stocks based on a diligent value analysis is usually considered one of the best practices. In value investing, investors pick stocks that are cheap but fundamentally sound. So the chance of these stocks allowing investors to book profits is high when the market trends upward. Thus, for long-term investors, a look at the intrinsic value of a stock is always warranted. So what are the criteria to identify value stocks?
A value stock may have a high dividend yield, low price-to-book ratio, low price-to-earnings ratio or a low price-to-sales ratio. However, it might be difficult for one to look at each parameter and compare with the peer group for an analysis on whether the stock is attractive from the value perspective. To make the task easier, Zacks has designed the new Style Score System.
The attractiveness of a stock as an investment option is confirmed by its Value Style Score of “A” or “B.” Our research shows that stocks with Style Scores of “A” or “B” when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best upside potential. Further, we have selected value stocks that have estimated earnings per share growth rate of 10% or more this fiscal year.
4 Prominent Value Picks
We suggest investing in The Children's Place, Inc. (PLCE - Free Report) , with a long-term earnings growth rate of 8% and a Value Score of “B.” In the past one year, the stock has surged roughly 40.6% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 15.8%. The stock has enjoyed positive estimate revisions over the past 30 days and has estimated earnings per share growth rate of 33.7% for fiscal 2017.
This specialty retailer of children's apparel delivered an average positive earnings surprise of 36.6% over the trailing four quarters and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
You may also consider Big 5 Sporting Goods Corporation (BGFV - Free Report) , which operates as a sporting goods retailer. The stock carries a Zacks Rank #1 and has a Value Score of “A.” The company posted an average positive earnings surprise of 94.5% in the trailing four quarters and has a long-term earnings growth rate of 9%.
The stock has estimated earnings per share growth rate of over 50% for 2017. In the past year, the stock has displayed a fabulous bull run on the index and has risen 60.4%, while the Zacks categorized Retail – Miscellaneous/Diversified industry decreased 5%.
Office Depot, Inc. (ODP - Free Report) , a supplier of office products and services, with a long-term earnings growth rate of 10.9% is a solid bet. The company posted positive earnings surprise in the trailing three quarters and has a Value Score of “A.” In the past year, this Zacks Rank #2 stock has exhibited a bullish run and surged 57.7%, while the Zacks categorized Retail – Miscellaneous/Diversified industry decreased 5%. The stock has estimated earnings per share growth rate of 15% for 2017.
Investors can count on Ruth's Hospitality Group, Inc. , an operator of fine dining restaurants, with a long-term earnings growth rate of 14.3%. The company posted positive earnings surprise in the trailing three quarters and has a Value Score of “B.” In the past year, this Zacks Rank #2 stock has exhibited a bullish run and surged roughly 34.5%, while the Zacks categorized Retail-Food & Restaurants industry gained 11.6%. The stock has estimated earnings per share growth rate of 10.8% for 2017.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
4 Retail Stocks with Great Value & Earnings Growth Potential
“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett
The strategy is quite simple – find stocks that are trading below their inherent worth. An investment decision based on the intrinsic value of stocks seems feasible in an economy, which just witnessed a hike in interest rates, encountered softness in the pace of construction and factory output last month, and saw oil prices lose more ground yesterday.
In today’s discussion, we are focusing on the Retail-Wholesale sector, which is in the bottom 13% of the Zacks Sector Rank (14 out of 16). But before zeroing on a strategy and looking for lucrative counters to bet your bucks, let’s take a sneak peek into what’s going on in the sector.
Changing Dynamics of Retail
The retail sector has been undergoing a fundamental change. With a digital transformation in shopping and consumers splurging online, store and mall traffic has been hit hard. As a result, most retailers, including big-box, are struggling to compete with e-commerce channels and are being forced to trim their store count to focus more on an online model.
We note that retail sales in May recorded the steepest drop in 16 months, reflecting a scenario where consumers are curtailing their spending. This raises doubts as to whether economic growth has somewhat tempered in the current quarter. The dismal sales report comes on the heels of soft job addition witnessed last month. (Read: Will Soft May Retail Sales Make Investors Revisit Portfolio?)
Nevertheless, the sector still holds some promise, given the favorable economic indicators. We note that so far in the year, the sector has registered an increase of 13.2% compared with the S&P 500 that was up roughly 8.9%. The rebound in oil prices from all-time lows, decelerating unemployment rate, and a gradual improvement in the housing market signal that the economy is on a recovery mode. These factors are playing a crucial role in raising consumers’ confidence. We expect this positive sentiment to translate into higher consumer spending.
Thus, adding a few stocks from the space would be a prudent decision at the current juncture. We suggest investing in top-ranked stocks with a good value score and solid earnings growth potential.
Here’s the Ideal Strategy
Investment in stocks based on a diligent value analysis is usually considered one of the best practices. In value investing, investors pick stocks that are cheap but fundamentally sound. So the chance of these stocks allowing investors to book profits is high when the market trends upward. Thus, for long-term investors, a look at the intrinsic value of a stock is always warranted. So what are the criteria to identify value stocks?
A value stock may have a high dividend yield, low price-to-book ratio, low price-to-earnings ratio or a low price-to-sales ratio. However, it might be difficult for one to look at each parameter and compare with the peer group for an analysis on whether the stock is attractive from the value perspective. To make the task easier, Zacks has designed the new Style Score System.
The attractiveness of a stock as an investment option is confirmed by its Value Style Score of “A” or “B.” Our research shows that stocks with Style Scores of “A” or “B” when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best upside potential. Further, we have selected value stocks that have estimated earnings per share growth rate of 10% or more this fiscal year.
4 Prominent Value Picks
We suggest investing in The Children's Place, Inc. (PLCE - Free Report) , with a long-term earnings growth rate of 8% and a Value Score of “B.” In the past one year, the stock has surged roughly 40.6% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 15.8%. The stock has enjoyed positive estimate revisions over the past 30 days and has estimated earnings per share growth rate of 33.7% for fiscal 2017.
This specialty retailer of children's apparel delivered an average positive earnings surprise of 36.6% over the trailing four quarters and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
You may also consider Big 5 Sporting Goods Corporation (BGFV - Free Report) , which operates as a sporting goods retailer. The stock carries a Zacks Rank #1 and has a Value Score of “A.” The company posted an average positive earnings surprise of 94.5% in the trailing four quarters and has a long-term earnings growth rate of 9%.
The stock has estimated earnings per share growth rate of over 50% for 2017. In the past year, the stock has displayed a fabulous bull run on the index and has risen 60.4%, while the Zacks categorized Retail – Miscellaneous/Diversified industry decreased 5%.
Office Depot, Inc. (ODP - Free Report) , a supplier of office products and services, with a long-term earnings growth rate of 10.9% is a solid bet. The company posted positive earnings surprise in the trailing three quarters and has a Value Score of “A.” In the past year, this Zacks Rank #2 stock has exhibited a bullish run and surged 57.7%, while the Zacks categorized Retail – Miscellaneous/Diversified industry decreased 5%. The stock has estimated earnings per share growth rate of 15% for 2017.
Investors can count on Ruth's Hospitality Group, Inc. , an operator of fine dining restaurants, with a long-term earnings growth rate of 14.3%. The company posted positive earnings surprise in the trailing three quarters and has a Value Score of “B.” In the past year, this Zacks Rank #2 stock has exhibited a bullish run and surged roughly 34.5%, while the Zacks categorized Retail-Food & Restaurants industry gained 11.6%. The stock has estimated earnings per share growth rate of 10.8% for 2017.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>