2 No-Brainer Value Stocks You Can Buy Right Now
Finding deals is not that easy in today’s sparkling market. But the good news for value investors is that cheap stocks are making a comeback as investors shy away from growth stocks over concerns about rising interest rates.
Earnings season has just highlighted a pair of gems that have delivered stellar quarterly results but still appear to be overlooked by Wall Street. Let’s see why Target (NYSE: TGT) and Children’s place (NASDAQ: PLCE) look like good deals to pick up today.
Objective: to do everything correctly
Target (NYSE: TGT) has been one of the most impressive brick and mortar retail stories in recent years. The big box chain has evolved into a one-stop omnichannel retailer with an array of popular exclusive brands and same-day processing options that are hard to match.
The company’s first quarter report showed why Target’s new strategy was so successful. Comparable sales jumped 22.9% and two-year comps increased over 35%. Profitability also increased thanks to a 36% growth in company-owned brands – a company record – and the success of its in-store fulfillment strategy, which is much more profitable than shipping orders. of e-commerce from a warehouse. Target’s operating margin in the quarter improved to 10% and adjusted earnings per share jumped to $ 3.69, also a record, which easily beat analyst consensus at $ 2.25.
The target share is now trading at a price / earnings ratio of 18, compared to the S&P 500 at 44, a very good price for a title that still has promising long-term growth prospects such as its small format stores and omnichannel activity.
While comparisons will become more difficult during the rest of the year, there’s a good chance that Target will continue to surprise on the upside – it carries significant momentum in economic reopening through the success of strategies like owned brands and same day fulfillment services. like Drive Up.
Children’s Place: much louder than it looks
One of the biggest surprises of this results season has been Children’s place (NASDAQ: PLCE), the children’s clothing chain that was mostly overlooked during the pandemic. The mall chain crushed analyst estimates in its first quarter earnings report, posting earnings per share of $ 3.25, a quarterly record, against estimates of just $ 0.06. Revenue exceeded 2019 levels by 6%, even though the company had 27% fewer stores than two years ago.
Children’s Place mostly struggled during the pandemic, but it took the opportunity to accelerate its store optimization strategy, closing underperforming locations and shifting to e-commerce investments, and this strategy is clearly paying off. . The operating margin reached 15% over the period, an impressive feat for any merchant, thanks to the reduction in occupancy costs following store closings. CEO Jane Elfers said steady-state digital penetration now accounts for around 50% of total sales. Digital is its channel at the highest margin.
The company declined to provide guidance, but there are a number of favorable winds in its favor for the remainder of the year. Children’s Place normally makes most of its profits in the second half of the year through back to school and vacations, and we should expect that pattern to repeat itself this year. This year, he will also benefit from the new Child Tax Credit, which gives most American families $ 250 to $ 300 a month starting in July, as well as getting children back to school in the fall, as well as a wider tailwind in clothing that most shoppers delayed their clothing purchases during the pandemic.
Extrapolating its first quarter EPS results for the remainder of the year would give the company $ 13 EPS this year, meaning its P / E ratio is only seven. Based on favorable winds in the second half of the year, there is a good chance that the company will reach this mark for the whole year. At a price of less than $ 100, this would really make Children’s Place a bargain today.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.