The company yields over 2% in dividends while offering a sustainable 30% dividend payout ratio. Both of them rank better than the respective 1.86% and 69% industry medians.
In terms of valuation, Nordstrom, Inc. (NYSE:JWN) trades at just 14.78 times P/E consensus estimate, at a considerable discount versus the industry average of 23.26 times P/E.
In terms of profitability, the company currently offers an operating margin of 11.1%, close to its 11.5% historic high and considerably above the 2.2% industry average. Same is the case of the net margin of 6.1% and Revenue and EDIBTDA Growth rates of 10.7% and 13.4%, respectively.
The company possesses a strong brand image that attracts an upscale clientele, allowing a wider margin generation. However, it combines exclusive brands and products with more inclusive merchandise to differentiate from other mall-based department store retailers, thus alluring a wider public, too.
Strong fourth quarter FY 2012 results surpassed consensus estimates and created a promising outlook. Management estimates earnings for 2013 to reach $3.65-$3.80 per share, based on estimated sales growth of 4.5% to 6.5%. Share repurchases could lower the earnings a little bit but stockholders would still be benefited.
The firm continues to focus on store base expansion as a top line growth driver. Several store openings are planned for 2013 in addition to the ongoing strategy to strengthen its presence is both Canada and Manhattan, which, as Zacks analysts assure, “should not only boost market share but also improve longer term top-line trends.”
Bottom line
While George Soros decided to buy J.C. Penney Company, Inc. (NYSE:JCP) less than a month ago and is already seeing a 20% upside on the stock price, I would recommend holding on this company as several reasons lead to an unstable situation with unpredictable results. Extra reasons to hold are provided by the insider sales of Roth Steven, Director, and Vornado Realty Trust, 10% owners. Each of them sold 10 million shares less than a month ago. This is usually not a sign that indicates that they necessarily trust future results.
In line with Deutsche Bank, I would advocate investing in high-income focused retailers, like Macy’s, Inc. (NYSE:M), over J.C. Penney, which have provided wide gains over the past few years. Trading at 11.43 times 2013 consensus estimate, I would believe that a good entry point is available.
The article 3 Retail Stocks to Keep an Eye On originally appeared on Fool.com and is written by Victor Selva.
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