Android app on Google Play

Nomura Securities Retail Weekend Reading: Sanity Check - Framing Stocks Using Enterprise Values

July 27, 2012 1:40 PM EDT Send to a Friend
Get Alerts TJX Hot Sheet
Price: $59.70 -0.32%

Rating Summary:
    16 Buy, 9 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 14 | Down: 14 | New: 19
Trade TJX Now!
Join SI Premium – FREE
Nomura Securities Retail Weekend Reading: Sanity Check - Framing Stocks Using
Enterprise Values

Analysts, Paul Lejuez and Aram Rubinson, said, "The market correctly focuses on key metrics such as P/E and EBITDA multiples, ROIC, and free cash flow. While these are important metrics to consider in making investment decisions, we also believe it is a good sanity check to simply look at enterprise value (EV). We believe that our simple EV sanity check, combined with more traditional valuation and operating metrics, can help better frame investment decisions. For the same price of TJX Cos (NYSE: TJX) (EV of $32.5BN), we would rather own Limited (NYSE: LTD) and Coach (NYSE: COH), which combined has higher EBITDA, FCF, and sq ft growth. Lululemon (Nasdaq: LULU) and Michael Kors (Nasdaq: KORS) have roughly the same EV and trade at similar multiples. We prefer KORS, as we believe it can grow faster thanks to accessories being more portable than apparel. Amazon's (Nasdaq: AMZN) EV is the largest in our coverage and 6% higher than HD’s. At the writing of this report, Tractor Supply (Nasdaq: TSCO) and Advanced Auto (NYSE: AAP) had EVs within 5% of each other. In our view, the two could well be earning identical earnings as soon as 2014, but TSCO has a runway for seven-plus years of 8% unit growth vs. ~3% for AAP. Bed Bath & Beyond (Nasdaq: BBBY) and Dollar Tree (Nasdaq: DLTR) are two of the best merchants we cover. Both execute unique formats and fetch similar EVs of $12-13B."




You May Also Be Interested In


Related Categories

Analyst Comments, Retail Sales

Related Entities

Nomura, Earnings

Add Your Comment