Follow Billionaire Eddie Lampert’s Lead at Sears Holdings Corporation (SHLD)? – Target Corporation (TGT), Simon Property Group, Inc (SPG),

To give you an idea of the scale that Wal-Mart and Target Corporation (NYSE:TGT) operate on in comparison to Sears, just look at how their revenues stack up. Sears generates some $40 billion in revenue, Target $73 billion, while Wal-Mart generates a whopping $469 billion. Sears also only operates some 4,000 stores, compared to Wal-Mart’s 10,700.

Let’s have a look at some numbers

Based on valuation, Sears appears to trade well below a couple major peers…

Price to Sales

Sears 0.1x
Wal-Mart 0.5x
Target 0.5x

But is the stock cheap for a reason? Quite possibly so, based on the company’s ability to lose cash and generate a negative return on investment:

5-Year Cash Flow Growth (Historical)

Sears -44%
Wal-Mart 6%
Target 3%

Return on Investment (5-year average)

Sears -13%
Wal-Mart 13%
Target 8.5%

The numbers don’t get any better when looking at how Wall Street expects the business to perform.

5-Year Expected Earnings Growth

Sears -164%
Wal-Mart 9%
Target 11.5%

Don’t be fooled
Sears does have some support from other major hedge funds, but not the support of Wall Street. The average Wall Street price target is $17, which is 65% downside, and Wall Street expects a negative 164% annual EPS growth rate over the next five years; it’s tough to own Sears right now. The news has been well circulated that Sears has inherent value in its real estate portfolio, but it appears the market doesn’t really care. In reality, the real estate may well be a moat, but there is not a “catalyst” that will move the stock higher. The company also has $40 per share in debt and I’m not willing to invest on its real estate value alone.

The article Follow Billionaire Eddie Lampert’s Lead at Sears? originally appeared on Fool.com and is written by Marshall Hargrave.

Follow Billionaire Eddie Lampert’s Lead at Sears Holdings Corporation (SHLD)? – Target Corporation (TGT), Simon Property Group, Inc (SPG),

Published on March 14, 2013 at 3:07 pm by The Motley Fool in Hedge Funds

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