Getting hammered on disappointing earnings from WMT and TGT.
DG down 12%, DLTR down 16%.
COST also down over 9%, must be a record of sorts.
Only positive amongst discount retailers is TJX up 9% on earnings beat and improved outlook.
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COST also down over 9%, must be a record of sorts.
Great firm, but valuation has always been something requiring a tiny leap of faith.
Do people think it’s a buy here?
I’m not an expert, but nor am I going to spend the next few hours trying to become one.
Trailing P/E isn’t an entirely crazy metric for a firm with such a steady march of profits: a cyclical adjustment is barely worth the bother.
And high-ish multiples make some sense for high quality goods.
But it looks like it has fallen from ~48 times earnings to ~35, not obviously a screaming buy.
Oddly enough, the 35 is still within the general trend “channel” of gradually expanding multiples since 2010.
A decade ago, plus or minus a couple of years, it averaged around 30% cheaper than after today’s fall.
Jim
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Great firm, but valuation has always been something requiring a tiny leap of faith.
Do people think it’s a buy here?
I posted this yesterday on the COSTCO board - summary; a decent entry point at current levels, but not a table-pounder. Around $400/share things get much more interesting.
https://discussion.fool.com/fair-value–35114849.aspx
tecmo
…
PS: I like to look at revenue instead of earnings; as their margins are VERY stable and revenue is probably a slightly more stable metric.
PS: I like to look at revenue instead of earnings; as their margins are VERY stable and revenue is probably a slightly more stable metric.
Very stable AND steadily improving. I just look a closer look and agree that, while no longer extremely over valued, the current price does not offer obvious market beating returns. Every few years COST is offered up at under 25 PE. That would give a price target of ~ $300. It sold near $300 briefly last year.
PP
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PS: I like to look at revenue instead of earnings; as their margins are VERY stable and revenue is probably a slightly more stable metric.
It certainly makes sense to start with the best yardstick.
But as you note, their margins are very stable, so the earnings themselves are relatively stable too.
So I took the easy way out for my first try : )
Main “flaw” is the much improved tax rate 2018 and later, down by about 9.4%.
The value increase is real and might also be real when trying to get a handle on a “normal” valuation multiple,
but of course the earnings series can’t be used to build a trend line.
An analyst comment I spotted—
"A membership rate hike is likely in the cards. With membership fees basically
amounting to pure profit, it behooves investors to know when they will likely increase.
Over the last 15 years, membership fee increases have occurred roughly every five and a half years.
The five year anniversary of the latest increase comes up this June.
While an increase is not guaranteed, it seems likely to come this year or next."
Not that it’s earth shattering and you no doubt know all this stuff, but it’s nice to hear an analyst make a comment that’s potentially useful.
Jim
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