As of September 21, 2023, Macy's Inc (M, Financial) closed at a price of $10.98, reflecting a daily gain of 2.04%. Despite a 3-month loss of 27.65%, the company's Earnings Per Share (EPS) stands at 2.7. The question that arises is: Is Macy's Inc significantly undervalued? This article aims to provide a detailed valuation analysis of Macy's Inc, encouraging readers to delve into the company's financial intricacies.
Founded in 1858, Macy's Inc is a New York City-based retail giant operating about 550 stores under its nameplate. In addition to nearly 60 stores under the Bloomingdale's and Bloomie's nameplates, it also runs 158 freestanding Bluemercury specialty beauty stores. Macy's Inc also has a strong online presence and licenses two Bloomingdale's stores in the United Arab Emirates and Kuwait. The company's 2022 sales were predominantly composed of women's apparel, accessories, shoes, cosmetics, and fragrances, accounting for 61% of the total sales.
Understanding the GF Value
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides a fair trading value for the stock. If the stock price is significantly above the GF Value Line, it is overvalued, and if it's significantly below, it's undervalued.
According to GuruFocus' valuation method, Macy's Inc appears to be significantly undervalued. With a current share price of $10.98 and a market cap of $3 billion, the stock's future returns are likely to be much higher than its business growth.
Investing in companies with low financial strength could lead to permanent capital loss. Therefore, it's crucial to review a company's financial strength before purchasing its shares. Macy's Inc has a cash-to-debt ratio of 0.07, ranking worse than 85.99% of 1099 companies in the Retail - Cyclical industry. This suggests a fair balance sheet.
Profitability and Growth
Companies that have consistently been profitable over the long term offer less risk to investors. Macy's Inc has been profitable 9 out of the past 10 years, with a revenue of $24.40 billion and Earnings Per Share (EPS) of $2.7 over the past twelve months. Its operating margin of 4.3% ranks better than 54.76% of 1114 companies in the Retail - Cyclical industry.
Growth is a critical factor in a company's valuation. Macy's Inc's 3-year average revenue growth rate is worse than 50.33% of 1047 companies in the Retail - Cyclical industry. However, its 3-year average EBITDA growth rate of 13.8% ranks better than 61.94% of 896 companies in the same industry.
Another measure of a company's profitability is the comparison of its return on invested capital (ROIC) and the weighted average cost of capital (WACC). For the past 12 months, Macy's Inc's ROIC is 7.16, and its WACC is 6.24.
In summary, Macy's Inc (M, Financial) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 61.94% of 896 companies in the Retail - Cyclical industry. To learn more about Macy's stock, you can check out its 30-Year Financials here.
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