Warming Up To Foot Locker, Inc. (FL)

Not alone

The general macro trend can also benefit another key player, The Finish Line (NASDAQ:FINL). This company sells sport and casual footwear, apparel and accessories through more than 650 stores in 47 states. The Finish Line also seems to be attractively priced, but I’m not ready to invest here yet. Shares of this mall-based retailer have a P/E of 12, which is appealing. The key aspect here, though, is that those numbers are based on trailing 12-month (TTM) earnings that do not take into consideration the most recent quarter. The company is scheduled to release fourth quarter and fiscal-year 2013 earnings on March 28. Those results and related conference call should not only provide insight to the company’s performance but also to the broader industry. Based on current analyst estimates for next year’s earnings, The Finish Line has a forward P/E ratio of 11.4, a bit higher than the 10.5 for Foot Locker Inc. (NYSE:FL). It will be interesting to see how those estimates change following the conference call. I’m not willing to make a bet with this stock one way or another until then.

Caveats

Clearly, there are many risks and reasons to be cautious on the retail area in general and Foot Locker more specifically. One cannot readily dismiss the potential negative impact on the economy of the sequester (or other budget issues that may arise through the year), or the potential for external shocks. Further, the recent upward trend in stock prices has powered the Dow Jones Industrial Average to record highs, with two-thirds of the DJIA components currently overvalued. A broad sell-off could, of course, hit even value stocks.

Foot Locker Inc. (NYSE:FL) shares have essentially been treading water since the earnings-induced sell-off. Based on firm-specific and macro dynamics, I view the current valuation as an attractive entry point for longer-term investors willing to stomach the potential risks.

The article Warming Up To Foot Locker originally appeared on Fool.com and is written by Erik Dellith.

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