Bull of the Day: DSW (DSW)
DSW Inc. (DSW) is finding its footing as it reported a record second quarter. This Zacks Rank #1 (Strong Buy) raised guidance and earnings are expected to jump by the double digits this year.
DSW sells footwear and accessories through several retail concepts including DSW Designer Shoe Warehouse, Shoe Company, Shoe Warehouse and Town Shoes.
It sells in over 1,000 retail stores as well as via e-commerce sites and its mobile app.
Big Beat in the Second Quarter of 2018
On Aug 28, DSW reported second quarter results and easily blew by the Zacks Consensus Estimate. Earnings were $0.63 versus the consensus of $0.47, for a 34% beat.
It was a record quarter for sales and earnings.
Total revenue jumped 16.4% to $795 million.
Comparable sales rose 9.7%, which was one of the best quarters in years and one of the best in the retail industry during the quarter.
It wasn't just shoes that were strong sellers but accessories were also solid.
The company is also building the brand through its VIP loyalty program, which is free to join and provides perks and free shipping.
Raised Full Year Outlook
Given the strong quarter and the momentum it has heading into the holiday season, DSW raised its full year earnings guidance to a range of $1.60 to $1.75 from the prior range of $1.52 to $1.67.
The analysts rushed to raise their estimates to be in line, with the Zacks Consensus Estimate jumping to $1.74 from $1.62 in the last month. That would be earnings growth of 14.5% over fiscal 2017.
They also raised fiscal 2019 estimates, pushing the 2019 Zacks Consensus Estimate up to $1.91 from $1.72. That's earnings growth of 9.7%.
Shares Still Attractively Valued
Despite the shares surging 45% year-to-date, the stock is still attractively priced.
It trades with a forward P/E of 17.9, which is certainly not nose bleed levels.
DSW has other value fundamentals including a price-to-book ratio of just 2.7. A P/B ratio under 3.0 usually indicates value. It also sports a P/S ratio of 0.9. A P/S ratio under 1.0 can mean a company is undervalued.
Additionally, it's shareholder friendly with a dividend currently yielding a juicy 3.2%.
For investors looking for a retailer to own for the upcoming holiday season, DSW is certainly one to keep on the short list.
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