Low Valuation Signal Indicated at Staples?
Staples is the world's leading office products company. Sales by product line: office supplies 44%; office machines and related products 30%; computers and related products 15%; services 6%; and office furniture 5%. At January 28, 2012, SPLS operated 2,295 superstores, mostly in the United States (1,583 stores) and Canada (334 stores), but also in a number of other countries, including: the U.K. (137), Germany (62), the Netherlands (46), Portugal (35), China (28), Norway (21), Australia (17), Sweden (17), Finland (7), Belgium (6) and Argentina (2).
Staples shares recently sold off due to exposure to Europe (331 stores or 14%), we believe that the current valuation is attractive and has more than discounted the risk of slower European sales.
Attractive metrics: Price/Earnings ratio of 9X, PE/G ratio of 0.8, ROC of 38% and an earnings yield of 14%.
Market Capitalization of $USD 8.8 billion and a dividend of 3.5%
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LOW VALUATION / BUY SPLS AT $USD 13.00 (SPLS-US, $USD 12.74)
Purple Chips model assumes earnings remain stable to higher. A target of $20 is seen within 18 to 24 months.
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