All About Macy’s

Macy’s was originally R. H. Macy & Co. and has operated its flagship store on Herald Square in New York City for over a century. It competes with the likes of Belk, Bon-Ton, Dillard’s, Nordstrom, Neiman Marcus, Lord & Taylor and Sacks Fifth Avenue. This is the company that has sponsored the annual Macy’s Thanksgiving Day Parade in New York City for 89 years. Analysis credits the company’s ability to read and stay ahead of popular culture and diverse merchandising for much of its success. Macy’s operates more than eight hundred stores in the USA and operates Bloomingdale’s as a separate division. From three hundred kiosk locations in malls across the country Macy’s sells consumer electronics. Currently Macy’s stock has a P/E ratio of 14.76 on 376 million shares. Earnings per share are $3.45. Macy’s has a $19 Billion market cap.

Is It Still Time to Buy Macy’s?

Finding a good stock investment depends on what you need to know about the stock and its market niche in order to invest intelligently. Let us look at retailing. Retail consumers can be fickle. Buyers for the likes of Macy’s need to know a year in advance that every child in the universe is going to want a Teen Age Mutant Ninja Turtle for Christmas and not a Teen Age Mutant Ninja Frog. If the company orders enough of these toys in time for the holidays it prospers. If it does not order enough or perhaps does not order any it misses out on sales and shoppers go to different stores. If it orders the wrong toy (Ninja frog) it makes no sales, has wasted money on useless merchandise, and customers flock to other stores for the hot toy (Ninja Turtle). Macy’s makes money because it and its buyers are able to stay tuned into popular culture regarding clothes, toys, cosmetics, etc., etc., etc. The ability to do this year after year after year builds a brand that people rely on and spend money on. Value based stock investing is investing in stocks that grow, stocks that pay, and stocks that last. To the extent that Macy’s can continue to predict trends and efficiently sell their products they will continue to prosper. If that is the case it is still time to buy Macy’s.

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In value based stock investing investors consider the book value of a company and its earnings, preferably an accurate assessment of anticipated earnings. The formula includes a “fudge factor” of 22.5 and calculates the square root of earnings per share multiplied by book value per share. An average Graham number is 1.5. The Graham number is read like the price to earnings ratio. High is overpriced and low is underpriced. Whereas value based stock investing considers a price to earnings ratio of more than fifteen to be high, a Graham number of one and a half carries the same implication. In picking new winners in the stock market, value investors focus on these numbers. When a market downturn occurs it is often a field day for value based stock investing as stocks with substantial long term value are available for low Graham numbers or price to earnings ratios. Value based stock investing seeks to find profit in individual stocks. In addition to stocks with attractive PE ratios or Graham numbers investors look at just what a company does, how well they do it, and how much profit they make, or could make, in the future.

A good example of an attractive stock for value based stock investing might be DDI Corp – DDIC – who design and make circuit boards. Its Graham number implies that it should be priced fifty percent higher. It is mid cap stock which means that fewer analysts follow it than follow large cap stocks causing its promising financials to be overlooked by the market in general. By comparison Quaker Chemical Corp – KWR – is a specialty chemical maker that lost nearly ten percent in the last year but whose Graham number implies a real value of nearly thirty percent more that its current price. This is where knowing what the company does and how it fits into the overall picture is essential for value stock investing. A company whose business will falter during an economic downturn may have a low price to earnings ratio or Graham number but, in fact, may be liable to a lower set of numbers if the current recession worsens. A large cap company may or may not be a good stock investment based on value based stock investing principles. Companies like ExxonMobil – XOM, Freeport-McMoRan Copper & Gold Inc. – FCX, Delta Airlines – DAL, or Hewlett Packard – HPQ may or may not be fairly priced depending upon the state of the economy but they are typically followed closely by many stock analysts so that their market price is typically closer to what value investing considers a fair market value.

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