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Staples, Inc. Message Board

  • jenaferraro jenaferraro Sep 4, 2012 5:26 PM Flag

    The Motley Fool....Staples around 35% undervalued.

    Assuming Staples' meets analyst expectations for 10.9% annual EPS growth over the next 5 years, 2016 EPS would come out to $2. At even a 13x multiple, the future value of the stock is $26. Discounting backwards by 12% yields a present value of $14.75, which makes Staples around 35% undervalued.

    But, it gets better. The stock is only 90% as the broader market, and the dividend yield is very generous at 4%. Shares are now the 52-week low while free cash flow over the TTM has been edging upwards.

    The strategy for Staples going forward will be to increase scale and awareness. A recent study from GroupM Next showed that nearly half of prospective shoppers at physical stores will complete the transaction online if they are able to save 2.5% or more. I believe that the company should consider buying out competitor OfficeMax to not only increase brick-and-mortar presence but to hedge against its vulnerable online visibility. While the company may never be able to successfully penetrate the online market, it can successful create an oligopolistic control of the office retail space. So, in conclusion, I recommend buying shares in OfficeMax to capitalize off of takeover speculation; buying shares in Wal-Mart for safety; and buying shares in Staples for multiples exp

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