3 Stocks Near 52-Week Highs Worth Selling: Pier 1 Imports, Inc. (PIR), Kforce Inc. (KFRC)

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We may not be better off than we were five years ago, but the investors don’t seem to care as the market continues to march higher. For skeptics like me, that’s an opportunity to see whether companies have earned their current valuations.

Keep in mind that some companies deserve their current valuations. ARM Holdings plc (ADR) (NASDAQ:ARMH) , for example, appears well-deserving of a new 52-week high after posting a 19% increase in sales and a 28% increase in year-over-year profits for the fourth-quarter. Furthermore, ARM’s first-quarter forecast was ahead of Wall Street’s expectations and management also proposed a 35% dividend increase. Game-set-match, ARM!

Pier 1 Imports, Inc.Still, other companies might deserve a kick in the pants. Here’s a look at three companies that could be worth selling.

Lofty expectations
I freely admit there are a few retailers I’ve never come around to — Pier 1 Imports, Inc. (NYSE:PIR) is one of those retailers. Pier 1 has been a big beneficiary from the recent surge in new home sales as new homeowners are turning to the discount store for good deals on home furnishings and accessories. However, I have my own reasons to believe that investors may be getting way ahead of themselves here.

To start with, the housing rebound is really only a few months old, so to assume that it can continue at such a rapid pace with the payroll tax taking around $1,000 out of the average taxpayer’s pockets per year is a foolish assumption. Second, same-store sales growth of 8.2% in December, while definitely commendable, is going to be extremely difficult to duplicate or beat next year. There are fewer great deals to be had in the housing market and disposable incomes are shrinking because of higher taxes for many Americans. Finally, Pier 1 is valued at a lofty 22 times cash flow, a level it hasn’t seen regularly since 2005, the same year its stock began its multi-year descent from $20 to just $0.11 a few years later.

Unlike in 2009, I’d definitely say the worst is behind Pier 1, but I have a hard time recommending it as a buy anywhere above $15 with so many uncertainties still evident.

Cue the little elephants
I’ll give office supply chain OfficeMax Incorporated (NYSE:OMX) credit for some very entertaining commercials depicting small rhinos and elephants, but that won’t be enough to distract me from the fact that it’s a poor choice for an investment.

OfficeMax has doubled since it announced the extinguishment of $871.5 million in non-recourse debt related to notes backed by Lehman Brothers, which became null and void when Lehman went bankrupt. The result was a far less indebted OfficeMax that glimmered with a one-time profit on its books. But, I’d advise those who’ve been lucky enough to enjoy the ride to come down from the perch quickly. OfficeMax’s sales are projected to contract 2% this year and be flat next year as it closes underperforming stores and attempts to realign its focus toward traffic-driving mobile devices.

The problem with this plan is that Staples, Inc. (NASDAQ:SPLS) , my clear favorite in the office supply sector, beat OfficeMax to the punch by a good year. Staples made plans to reduce its square footage and focus on mobile long before OfficeMax, giving it a better chance at capturing traffic in a highly competitive market. Staples also offers investors much better overall value at just 9.5 times forward earnings and with a yield of 3.3%. OfficeMax shareholders will pay more than 13 times forward earnings for essentially flat growth with a yield of just 0.7%. Thanks, but no thanks, OfficeMax — you can keep your mini elephants!

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