Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Macy’s, Inc. (M), Target Corporation (TGT) – U.S. Retailers: 3 Companies and Only 1 Long Opportunity

In the last earning report, the company showed that revenue dropped by 0.9%, and this led to a decrease in EPS of 26%. However, the stock is now trading at a higher level compared to a year ago.

Weak fundamentals to remain in place

J.C. Penney Company, Inc. (NYSE:JCP)

operates department stores in the U.S. Given the company’s weak fundamentals, and its recently failed turn-around strategy, I would advise investors not to focus on J.C. Penney Company, Inc. (NYSE:JCP) for the time being. Its main figures are weak:

  • Operating Margin and Net Margin are negative and
    significantly below
    the industry average
  • Return on Equity (ROE) has decreased when compared to the same quarter one year prior
  • Cash to debt ratio of 0.3% could indicate deteriorating cash flow and liquidity risks going forward

Moreover, valuation is still not attractive. I would only go long on J.C. Penney Company, Inc. (NYSE:JCP) if its P/B ratio, currently at 1.3 times, would go below 0.8 times. The company has a huge real estate asset base that could make it attractive if it was selling at a significant discount to book value.


Macy’s, Inc. (NYSE:M) is the best pick considering the company’s out-performance of the stock market. Its strengths can be seen in EPS and revenue growth, increase in net income, and high ROE. Comparisons to Target Corporation (NYSE:TGT) make Macy’s, Inc. (NYSE:M) shares look undervalued, considering a ROE of 22.1% versus 18.1% and a P/E ratio of 14.3 times versus 16.5 times. Paul Tudor Jones and Jim Simons also invested in this stock in the last quarter, and i would follow them if I was looking for any stock within the retailer’s space.

Vanina Egea has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Vanina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article U.S. Retailers: 3 Companies and Only 1 Long Opportunity originally appeared on is written by Vanina Egea.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.