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Is It Time For Sears Holdings (SHLD) To Nosedive?

October 10, 2008 12:31 PM EDT
In today's Wall Street Journal, the Heard on the Street column had a negative piece on Sears Holdings (Nasdaq: SHLD). The column thinks Sears is overvalued and its due for a larger selloff.

Despite the current market environment, Sears still trades at a lofty 26 times this year's expected earnings. In comparison, Wal-Mart (NYSE: WMT) and Costco (Nasdaq: COST)-- both of which reported higher same-store sales last month, are trading in the mid-to-high teens.

Sears still trades at this lofty valuation despite steadily declining same-store sales and plummeting profitability over the past 18 months. The Journal thinks Sears stock will fall as the looming recession dampens consumer spending.

Part of the reason Sears could be trading at this expensive valuation as compared to other companies, is because it was included in the no-short-sale list. The short sale ban expired yesterday, and, Sears did fall in like kind. Additionally, Sears benefits from a relatively small float, as SHLD has continued to buy back stock.

Sears Holdings Corporation is the parent company of Kmart Holding Corporation (Kmart) and Sears, Roebuck and Co. (Sears).
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