On a day marked by a significant 10.95% gain, Kohl's Corp (KSS, Financial) catches the eye of many investors, especially considering its 2.73% gain over the past three months. With an Earnings Per Share (EPS) of 2.85, a pertinent question arises: is Kohl's modestly undervalued? This analysis aims to explore Kohl's current market valuation and provide insights into its true worth.
Company Introduction
Kohl's operates approximately 1,174 department stores across 49 states, offering moderately priced private-label and national brand products ranging from clothing to home furnishings. Most of these stores are strategically located in strip centers, complemented by a robust digital sales business. Women's apparel, representing 26% of its 2023 sales, stands as Kohl's largest category. Founded in 1962 and headquartered in Menomonee Falls, Wisconsin, Kohl's has grown to achieve a market cap of $2.90 billion, with sales reaching $17.50 billion. Currently, the stock price stands at $26.55, juxtaposed against a GF Value of $33.72, suggesting that the stock might be modestly undervalued.
Summarizing GF Value
The GF Value is a proprietary measure reflecting the intrinsic value of a stock, calculated through historical trading multiples, a GuruFocus adjustment factor based on past performance, and future business performance estimates. This valuation suggests that Kohl's stock, currently priced below its GF Value, may offer a higher future return potential due to its modest undervaluation.
Financial Strength and Stability
Before investing, evaluating a company's financial health is crucial. Kohl's financial strength is rated at 5 out of 10, indicating a fair condition. This assessment is supported by a cash-to-debt ratio of 0.03, which, although lower than 93.59% of its peers in the Retail - Cyclical industry, still warrants attention for risk assessment.
Profitability and Growth Prospects
Kohl's has demonstrated consistent profitability, with an operating margin of 4.1%, ranking better than 53.78% of its industry counterparts. The company's 3-year average annual revenue growth rate of 15% outpaces 73.45% of competitors, indicating a strong potential for continued expansion.
Evaluating Investment Efficiency: ROIC vs. WACC
An effective way to assess a company's investment efficiency is by comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). Currently, Kohl's ROIC is 5.1, slightly below its WACC of 5.91, suggesting challenges in generating excess returns on investments.
Conclusion
In conclusion, Kohl's presents a case of modest undervaluation with fair financial health and profitability. Its growth metrics are promising, although its investment efficiency could improve. For more detailed financial insights, consider exploring Kohl's 30-Year Financials here. For potential high-quality investments with low capital expenditure, the GuruFocus High Quality Low Capex Screener is an excellent resource.
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.
