The share price of department store Myer Holdings Ltd (ASX: MYR) is languishing at not just a 52-week low but in fact just a few cents from its all-time low which was set back in mid-2012. It's a point worth remembering given the current hot initial public offering (IPO) market we find ourselves in – Myer is very much a case study that jumping aboard a "hot float" is certainly no guarantee of a profit!
For some time now the investment metrics for value investors eying off Myer have looked appealing with the group trading at a discount to many of its peers and at levels which are enticing.
Unfortunately, investors to this point have been catching a falling knife. This turn of phrase refers to the danger of buying a stock which is falling on the expectation that it has fallen below fair value, only to have fair value drop and thereby wiping out the discount.
With the stock closing Friday at just $1.69, some value investors will no doubt once again be weighing up the potential of this stock. It's possible that Myer's share price has finally reached the floor and the knife has stopped falling.
Here are three reasons why better times may lie ahead…
- The first quarter showed comparable sales had increased by 0.7% year-on-year. In fact, comparable store sales growth has occurred in nine of the past ten quarters. This is certainly a move in the right direction and has led management to state that it anticipates sales growth in FY 2015.
- New store openings and store refurbishments are expected to help drive further momentum in sales growth. As the Chairman noted, Myer believes it will "begin realising the benefits of recent investments and a number of strategic initiatives."
- According to consensus data provided by Morningstar, earnings per share (EPS) appear to be stabilising with EPS bottoming in FY 2015 and then rebounding in FY 2016. Based on consensus figures, Myer is now trading on a FY 2015 fully franked dividend yield of 7.5% and a price-to-earnings ratio of 11x.
