On Jul 11, 2013, shares of Staples, Inc. (SPLS) recorded a new 52-week high of $16.70. At the end of the trading session, the stock closed at $16.67, up approximately 47.7% year to date.
The current price is 13.9% above the Zacks Consensus average price target of $14.63. Moreover, the stock is currently trading at a forward P/E of 12.56x, a 30% discount to the peer group average of 17.91. The long-term EPS growth rate stands at 6.9%.
Being a leading retailer of office products and services, we believe Staples remains well positioned to benefit from the sector consolidation that would help it capture incremental market share through rational pricing. The company is poised to generate growth by enhancing its online features, expanding offerings and streamlining its cost structure.
Staples is laying emphasis on improving store productivity, accelerating growth in adjacent categories and increasing market share in core office supplies. Alongside, the company is focusing on the delivery business, which requires less capital and generates higher margins. These factors could prove to be a game changer for the company in the long run.
However, the company continues to disappoint on the sales front as decline in business and consumer spending in the wake of the global meltdown and the deterioration of credit markets have resulted in sluggish demand for big-ticket items.
Going forward, we expect demand for office products to remain soft. Moreover, margins are likely to remain under pressure owing to the company’s price investment and macroeconomic headwinds.
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