'Turnarounds seldom turn' – is an investing quote often attributed to Warren Buffett and after 80 years of investing he should know.
However, the Myer Holdings Ltd (ASX: MYR) share price is now up nearly 50% in 2019 from 42 cents per share to 62.5 cents per share today, as investors warm to its turnaround potential on the back of a better-than-expected half-year profit result.
For the 26 weeks ending January 26 2019, Myer posted a net profit after tax of $41.3 million on revenue of $1.67 billion, which were up 3.1% and down 2.8% respectively.
Online sales were also up 18.6% to $151.2 million and online is (unsurprisingly) often flagged as a key growth opportunity for Myer and other overly bricks-and-mortar focused retailers.
On conventional valuation metrics Myer's share price is also arguably "cheap".
As its market cap stands at $509 million, versus a half year profit of $41.3 million. In other words it sells for just over 6x annualised profits.
Net debt is also looking manageable to suggest if Myer can deliver flat or growing profit growth over the next 1 to 3 years then the stock is indeed a turnaround candidate.
However, investors should tread carefully as Australia's retail sector remains under pressure as house prices fall and wages stagnate.
