As Black Friday and the holiday season approach, many consumers are eager to kick off their Christmas shopping or finally grab that TV or gaming console they've been eyeing. Yet for investors, the opportunities extend beyond retail sales as certain stocks are also presenting enticing deals.
In this blog post, we’ll leverage Trading Central’s Fundamental Insight and Strategy Builder to explore retail stocks that could appeal to those seeking to diversify their portfolios and position themselves strategically ahead of the busiest time of year.
Using Strategy Builder, we’ll establish a stock screener tool to refine our search within the extensive retail sector. Our focus will be on companies with a market capitalization of at least 300 million dollars, ensuring we target well-established firms that typically have more stability and growth potential. Additionally, we'll seek stocks with a price-to-sales (P/S) ratio of no more than 1, indicating that the price paid aligns favorably with the company's revenue generation, which is essential for value-oriented investments. Furthermore, we will consider stocks with a trailing price-to-earnings (P/E) ratio capped at 28. This suggests that these stocks may be undervalued compared to the current S&P P/E ratio of approximately 29, offering potentially lucrative investment opportunities.
To enhance our analysis with Fundamental Insight, we will filter for equities with a TC Quantamental Rating of 50 or higher. This rating indicates moderate to strong fundamentals in comparison to their industry peers, providing a solid foundation for investing. Additionally, we will restrict our selections to stocks with a minimum TC Value Factor Rating above 50, reflecting moderate-to-favorable ratios and valuation metrics compared to counterparts in the industry.
Now that our screener is established, let's dive into the results and some of the top picks.
Kohl’s ranks at the top of our screener with a market capitalization of $1.76 billion. It has the second-highest TC Quantamental Rating (TCQR) of 64 (tied with Sally Beauty) and boasts the highest Value Factor Rating at 84. So far this year, the stock has appreciated by 12.1%, and with a projected price of $21.60 over the next 12 months, it presents a potential upside of 37%. In addition to its strong Value score, Kohl's also has a Momentum score of 67, a Quality score of 61, and an Income score of 57. Notably, it features a price-to-book ratio of 0.46 and a Fair Value estimate of $35.04, based on a two-stage residual income model.
Currently ranked #2 in our screener, LuxExperience is also the second smallest company listed. Despite its size, it holds the highest TC Quantamental Rating at 73 and the lowest price-to-earnings (P/E) ratio at 1.47. Year to date, it has surged by 20.3%. With a projected price target of $12.40 over the next 12 months, LUXE offers a potential upside of 38%. Similar to Kohl’s, LuxExperience has strong Quality and Momentum scores of 70 and 80, respectively, while its price-to-book ratio is below 1.
The smallest company in our screener, Shoe Carnival, has a market cap of approximately $429 million. It currently holds a potential upside of 11% and ranks favorably against its peers in terms of Value and Income scores. However, the company has experienced double-digit negative EPS growth when comparing last quarter to the same period last year, and its Growth and Momentum scores are less than ideal. Nevertheless, with a price target of $17.40 and a fair value of $24.50, Shoe Carnival remains worth considering as a small but impactful player.
Wrapping up our highlights, JD.com is the largest company in our screener. It currently shows a TCQR of 51 and a Value Factor score of 61, having declined by 15% year to date. While it holds a respectable Income score of 57, its Quality score is lower at 41. Two factors to consider: JD.com has a P/E ratio of 9.72, significantly below that of the S&P 500, and a dividend yield of 3.44%. However, with a price target of $29.60, the potential for upside appears limited. Despite being the largest player in our screener, it seems that smaller companies, as illustrated in the examples above, may possess greater growth potential.
As the holiday shopping season approaches, investors are presented with unique opportunities in the retail sector. Using Trading Central’s Fundamental Insight and Strategy Builder, we've identified promising stocks that could enhance investor portfolios as they navigate the bustling market ahead of Black Friday and the holiday rush. Our analysis highlights different companies such as Kohl’s, LuxExperience, Shoe Carnival, and JD.com, each presenting a unique blend of moderate to strong TC Quantamental Ratings alongside various financial metrics to evaluate.
To stay informed about the latest investing trends and trading opportunities, keep an eye on our analyst articles and leverage Fundamental Insight and Strategy building to assist your investment decisions.
Happy Trading!
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