Investors have punished Myer Holdings Ltd (ASX:MYR) over the past month as poor interim profits, an earnings downgrade, the departure of the CEO and CFO and legal action over disclosure obligations have resulted in a near 30% drop in the value of the company's shares.
Assuming Myer achieves a full year net profit of $75 million, as estimated by management, Myer shares are now trading at a forward looking P/E ratio of only 10 times earnings. Given the ASX 200 is now trading at a forward P/E of 17x, should contrarian investors buy now?
While new CEO Richard Umbers has launched a strategic review that may help to turn around Myer's prospects and the shares are now trading on a dividend yield of over 9%, the company has reported a fall in profits for the past four consecutive years. It could be argued that all the bad news is now factored into the share price, but with Myer still surprising the market with earnings forecast downgrades, I think there are better opportunities for investors with an interest in the retail sector.
Unlike Myer, Harvey Norman Holdings Limited (ASX:HVN) has been a relative market darling, rising 30% over the past year. Harvey Norman recently reported a 27.4% lift in net profit after tax for the six months to December 31. With sales increasing, costs being cut and a healthy 9 cent per share dividend, Harvey Norman appears to be heading in the right direction.
Westfield Corp Ltd (ASX:WFD) is one of the world's leaders in developing and operating shopping centres. Following the restructure of the former Westfield Group, the company now operates exclusively overseas, with the majority of its assets and earnings coming from the U.S. The U.S. economic recovery, weakening of the AUD and a large development pipeline should provide Westfield with the growth prospects that investors are seeking.
Woolworths Limited (ASX:WOW) shares have fallen 5% so far this year and on a P/E basis are now trading at a discount to the ASX 200 average. Owner of Australia's most valuable brand and the country's second highest revenue earner, Woolworths provides shareholders with a 4.8% dividend yield and a proven track record of growing earnings and developing shareholder value.
