"Expect Great Things" is the tagline that mid-market department store Kohl's (KSS) puts on all of its marketing material. Unfortunately, Wall Street analysts aren't expecting anything great, as the current percentage of buy ratings stands at just 41%, which according to FactSet, is a six-year low.
Put another way, "the bad news is already priced in," says Ted Parrish, director of investments at Atlanta-based Henssler Financial, in the attached video. Not only is he boldly backing a stock he refers to as a "pretty boring story" but he does nothing to deflect criticisms that have plagued this company for years, and taken its share price from $80 in 2007 to below $50 today.
To be fair, the long-term decline of Kohl's has coincided with a number of other troubling macro-economic trends but what this company cannot claim is the ability to win over customers from weakened rivals such as J.C. Penney (JCP). But it's not for lack of trying.
"If we haven't turned the corner yet I don't think this company will remain a public company for very long," Parrish surmises. "It's market cap is flirting right around $10 billion which I think makes it an attractive company for some of the private equity shops."
And yet, no one is stepping up or into the stock, which has barely rebounded from the March 2009 lows. Kohl's is up less than 40% in four years versus a 125% gain for the S&P 500.
"This company has gotten it's clock cleaned," he says, "but there's a lot of value there."
Add in a P/E to growth ratio that's less than one, as well as "a lot of free cash flow," and you have a situation that he thinks is worth "north of $55 a share" with very little downside.
- Investment & Company Information