EXPR: A Real Retail Bargain?
I looked at retail stocks, and one really stood out: the fashion retailer Express, Inc. (NYSE:EXPR). Now, a chain of drug stores vs. an apparel store might be an apples-to-oranges comparison, but look at its valuation.
You can buy Express stock at a very low price. EXPR stock goes for 12.5 times earnings, 11 times forward earnings, 0.23 times sales, 0.79 times book value and 4.42 times free cash flow.
Of the thousands of stocks traded on public exchanges, this has got to be one of the cheapest. I checked, and you could say it’s among the seven cheapest. I found seven stocks that fit these criteria:
- Price/Earnings Ratio under 15
- Forward Price/Earnings Ratio under 15
- Price/Sales Ratio under 1
- Price/Book Ratio under 1
- Price/Free Cash Flow Ratio under 5
The amazing thing is that even these measures fail to fully capture how cheap EXPR stock really is. Express holds zero debt, and it has a cash position equal to some 40% of its market capitalization.
This gives Express an enterprise value equivalent to about 60% of its market capitalization. Enterprise value, which sets aside a company’s cash balances and debt, is arguably a better way to value the underlying business.
What about Amazon and the shellacking it’s giving retail? Well, Express seems to be making progress in the transition from brick-and-mortar to e-commerce. Online sales jumped 27% in the first quarter of 2017, and now make up 20.9% of EXPR’s revenue.
Investors, scared of Amazon, may be shunning the retail sector. EXPR looks to me like a dirt-cheap retail stock that’s flying under the radar of most investors, and a better buy than Rite Aid stock.
As of writing, Lucas Hahn did not hold a position in any of the aforementioned securities.