What Does the Future Hold for Office Depot?

With shares of Office Depot (NYSE:ODP) trading at around $4.05, is ODP 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

In regards to the question in the title, there is no telling what the future holds for Office Depot. However, we can take a look at recent events and numbers and then form a calculated opinion on the stock. However, you should always form your own opinion based on your own due diligence.

Office Depot hasn’t been doing well over the past several years. Revenue has been in steady decline, which is rare in the current environment. The industry has changed considerably, and this isn’t meant in a good way. Therefore, Office Depot needed to make some moves. One move was to offer more of what consumers are currently demanding, such as software, tablets, smartphones, copy printing and computer repair. Another move was to buy OfficeMax Incorporated (NYSE:OMX) for $1.17 billion. This is expected to generate more than $600 million in cost savings in three years, and it will give the newly formed company over $1 billion in cash. The new company is estimated to have $18 billion in sales, but that will still be shy of Staples (NASDAQ:SPLS), which had $24 billion in sales in 2012. The Office Depot/OfficeMax deal requires regulatory approval, which could take until the end of 2013. The deal is likely to go through, and it’s a move that both Office Depot and OfficeMax needed in order to have a fighting chance.

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