Is Macy’s a Big Mystery?

With shares of Macy’s (NYSE:M) trading at around $42.01, is the company an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

What’s so great about Macy’s? See below:

  • Better-than-expected Q4 results
  • Comparable-stores growth
  • A focus on price optimization
  • Integrated operations
  • Consolidated divisions
  • Effective cost management
  • Successful localization initiatives
  • Strong online sales
  • Expanding profit margins
  • Consistent revenue growth
  • Consistent EPS growth
  • Strong stock performance over the past four years
  • Management expects FY2013 EPS of $3.90 to $3.95

This looks like one of the greatest retail stories ever written, but there’s one problem. Insiders don’t seem to be as confident in future prospects as the investing public. It’s understood that insiders sell for a variety of reasons, but when insider sales go into the hundreds of thousands of shares over a 35-day period, it’s cause for concern. Even if these insiders are just taking profits, it indicates that they feel the stock is fairly valued, not undervalued.

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The chart below compares fundamentals for Macy’s, J.C. Penney Company (NYSE:JCP), and Nordstrom (NYSE:JWN). These three companies differ in size. Macy’s has a market cap of $16.25 billion, J.C. Penney has a market cap of $3.26 billion, and Nordstrom has a market cap of $12.67 billion.

M

JCP

JWN

Trailing   P/E

12.94

N/A

15.28

Forward   P/E

9.46

N/A

12.83

Profit   Margin

4.82%

-7.59%

6.05%

ROE

22.28%

-27.43%

37.99%

Operating   Cash Flow

$2.26 Billion

$10.00 Million

$1.11 Billion

Dividend   Yield

1.90%

N/A

2.20%

Short   Position

2.20%

43.80%

N/A

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock…

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