Staples (SPLS) is Far Too Undervalued - Barron's
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Quick, name the second largest online retailer after Amazon.com (Nasdaq: AMZN)...
If you guessed Staples (Nasdaq: SPLS), congratulations. Go take a coffee break on us.
Welcome back. According to Barron's over the weekend, investors might do well to make the stock a staple of their portfolio. With annual sales of $25 billion, Barron's believes the market value of $10 billion undervalues the company.
Shares are about 35 percent lower in 2011, but off of it's $11.94 52-week low hit in August. The stock is going for about 10x expected 2012 earnings of $1.50 per share.
The valuation is causing management to increase it's buyback power. Recently, Staples doubled it's stock repurchase plans from a capacity of $300 million to $600 million. Additionally, all the cash being generated is rewarding investors, with a 40 cent annual dividend yielding just under 3 percent.
Some analysts speculate Staples could regain it's former glory, with the stock moving to a range of $18 to $22 in 2012. With generous payouts keeping investors in, and expectations lowered over the last few quarters, even a delayed economic recovery probably won't add too much more to downside.
Staples' management is also making some strong moves in expanding margins. Store leases are being renegotiated on more favorable terms, and management is looking to slim down store sizes where possible. Staples also continues to offer mobile-phone plans from many major U.S. carriers.
One bull on Staples contends the market is "broad-brushing" the company, and shares are so cheap that any positive news will send them soaring. Staples is bigger than rivals OfficeMax (NYSE: OMX) and Office Depot (NYSE: ODP) combined, and has been investing heavily in its IT department, making a strong case for lessening competition from Amazon.
Risks moving forward include competition from Amazon, Wal-mart (NYSE: WMT), Costco (Nasdaq: COST), and others looking to bolster their office supplies business. Other key factors include the persistently-high unemployment rate, and cuts in government spending. Staples reported sales to the government fell 20 percent in the third quarter.
Staples is trading 4.4 percent higher Monday morning. Notably, at about $14.70, shares are at-or-below levels hit following the 2008-09 financial meltdown. August's $11.94 was far below those levels.
If you guessed Staples (Nasdaq: SPLS), congratulations. Go take a coffee break on us.
Welcome back. According to Barron's over the weekend, investors might do well to make the stock a staple of their portfolio. With annual sales of $25 billion, Barron's believes the market value of $10 billion undervalues the company.
Shares are about 35 percent lower in 2011, but off of it's $11.94 52-week low hit in August. The stock is going for about 10x expected 2012 earnings of $1.50 per share.
The valuation is causing management to increase it's buyback power. Recently, Staples doubled it's stock repurchase plans from a capacity of $300 million to $600 million. Additionally, all the cash being generated is rewarding investors, with a 40 cent annual dividend yielding just under 3 percent.
Some analysts speculate Staples could regain it's former glory, with the stock moving to a range of $18 to $22 in 2012. With generous payouts keeping investors in, and expectations lowered over the last few quarters, even a delayed economic recovery probably won't add too much more to downside.
Staples' management is also making some strong moves in expanding margins. Store leases are being renegotiated on more favorable terms, and management is looking to slim down store sizes where possible. Staples also continues to offer mobile-phone plans from many major U.S. carriers.
One bull on Staples contends the market is "broad-brushing" the company, and shares are so cheap that any positive news will send them soaring. Staples is bigger than rivals OfficeMax (NYSE: OMX) and Office Depot (NYSE: ODP) combined, and has been investing heavily in its IT department, making a strong case for lessening competition from Amazon.
Risks moving forward include competition from Amazon, Wal-mart (NYSE: WMT), Costco (Nasdaq: COST), and others looking to bolster their office supplies business. Other key factors include the persistently-high unemployment rate, and cuts in government spending. Staples reported sales to the government fell 20 percent in the third quarter.
Staples is trading 4.4 percent higher Monday morning. Notably, at about $14.70, shares are at-or-below levels hit following the 2008-09 financial meltdown. August's $11.94 was far below those levels.
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