Best Stocks to Buy for Around $5: Office Depot (ODP)
While the office supply game surely isn’t what it used to be thanks to e-commerce and online orders, there is hope for fallen giant Office Depot (ODP).
Office Depot merged with the struggling OfficeMax last year, which will generate big cost savings in the coming year; in 2014, the company is expected to return to profitability once more.
Look, nobody is impressed by ODP’s performance in the last few quarters. Consider this quote from Office Depot CEO Roland Smith in February after bad quarterly numbers: “While (fourth-quarter) results were clearly disappointing, they shouldn’t be a big surprise.” Furthermore, Office Depot warned that it expects sales to decline in 2014 as it restructures and closes underperforming stores.
The Office Depot-OfficeMax merger, however, changes the story here. The company is still battered based on its past history, and trading at a deep discount to its future sales and profits. Consider that ODP has about $1 billion in cash on hand and won’t see most of its debt come due until 2019, giving it a pretty nice cash cushion.
The downside in Office Depot appears limited now that the office space has consolidated and the pressures of e-commerce have been baked in. A secular recovery could increase hiring and business spending, and result in better sales for ODP as a result.
This still is a risky $5 stock, to be sure, but the worst does appear over for Office Depot.