Macy's Inc (M, Financial) recently reported a notable daily gain of 13.55%, complementing a three-month gain of 17.79%. With an Earnings Per Share (EPS) of $0.37, investors are keen to understand if the stock is trading at a fair value. This analysis aims to explore Macy's valuation, providing investors with a clearer picture of its current market position and potential investment value.
Company Introduction
Founded in 1858 and headquartered in New York City, Macy's operates a network of around 550 Macy's stores, nearly 60 Bloomingdale's locations, and 158 Bluemercury specialty beauty stores. With a strong e-commerce presence and international licensing, Macy's has become a prominent name in retail. The company's diverse product range, with a significant portion coming from women's apparel and accessories, generated $23.90 billion in sales in 2022. Macy's Inc (M, Financial) currently displays a stock price of $20.45, closely aligning with the GF Value of $20.75, suggesting a fair valuation. This introductory comparison sets the stage for a deeper valuation analysis.
Summarize GF Value
The GF Value is a proprietary metric that estimates a stock's intrinsic value by considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance forecasts. The GF Value Line represents the stock's ideal fair trading value. Macy's (M, Financial) appears to be fairly valued according to this method. With its stock price hovering around the GF Value Line, the long-term return of Macy's stock is likely to mirror the company's business growth rate.
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Financial Strength
Investing in companies with robust financial strength is crucial to mitigate the risk of capital loss. Macy's cash-to-debt ratio of 0.17 places it in a less favorable position compared to many of its peers within the Retail - Cyclical industry. Nonetheless, GuruFocus ranks Macy's financial strength as 6 out of 10, reflecting a fair balance sheet situation.
Profitability and Growth
Macy's has consistently demonstrated profitability, with a 9-year track record of gains out of the past decade. The company's operating margin stands at 5.09%, which is competitive within the Retail - Cyclical industry. Overall, Macy's profitability ranks at 7 out of 10, indicating a fair level of profitability. In terms of growth, Macy's 3-year average revenue growth rate surpasses that of 74.03% of its industry peers. However, its 3-year average EBITDA growth rate is at 0%, which is less impressive.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can offer insights into its profitability. Macy's ROIC over the past 12 months is 8.82, exceeding its WACC of 7.06, indicating the company is creating value for its shareholders. Below is the historical comparison of Macy's ROIC versus WACC.
Conclusion
In summary, Macy's (M, Financial) appears to be fairly valued with a stable financial condition and reasonable profitability. Despite its less impressive growth ranking within the Retail - Cyclical industry, the company's value creation is evident through its ROIC and WACC comparison. For a detailed look at Macy's financials, investors can view its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
