The Department of Commerce released its May food and retail sales report on Thursday, and the numbers beat expectations. Sales increased by 0.6% from April 2013, which surpassed the median forecast of 0.4%, and by 4.3% from May 2012. On the other hand, the Thomson Reuters/University of Michigan June preliminary index of consumer sentiment fell to 82.7, declining from 84.5 in May and missing the median forecast of 84.5.
While consumer confidence may have dropped, last month’s retail data is still encouraging to investors. In fact, stocks rallied on Thursday after the release of the Department of Commerce’s report. So for this screen, we set out to find U.S. retail stocks that are inspiring optimism amongst investors as illustrated by significant decreases in shares shorted month over month. Since short sellers benefit from falling share prices, the decline in shares shorted indicates that they expect the price to rise.
Finally, we looked for stocks that are undervalued as indicated by a low Price/Sales (P/S) ratio. A low P/S ratio means that the stock’s price is cheap in comparison to the company’s revenue. If a stock has a P/S below 1, it can be considered undervalued. It is important to note that the ratio doesn’t factor in expenses or debt, and variation between industries is to be expected.
For the following list we screened for stocks with P/S ratios under 2, which means that the company’s market cap isn’t more than 2x its annual sales. Investors should note that the four listed stocks have all outperformed the market over the last quarter by more than 15%.
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Are you optimistic about the future of these stocks? Use this list as a starting point for your analysis.
1. hhgregg, Inc. (HGG, Earnings, Analysts, Financials): Operates as a specialty retailer of consumer electronics, home appliances, and related services.
Market cap at $541.6M, most recent closing price at $17.21.
Shares shorted have decreased from 5.04M to 4.72M over the last month, a decrease which represents about 2.27% of the company's float of 14.07M shares. Days to cover ratio at 14.37 days.
Performance over the last quarter: 56.88%.
2. Barnes & Noble, Inc. (BKS, Earnings, Analysts, Financials): Operates as a content, commerce, and technology company in the United States.
Market cap at $1.15B, most recent closing price at $19.44.
Shares shorted have decreased from 11.15M to 8.13M over the last month, a decrease which represents about 8.29% of the company's float of 36.43M shares. Days to cover ratio at 5.87 days.
Performance over the last quarter: 18.18%.
3. J. C. Penney Company, Inc. (JCP, Earnings, Analysts, Financials): Through its subsidiary, J. C. Penney Corporation, Inc., operates department stores in the United States and Puerto Rico.
Market cap at $3.99B, most recent closing price at $18.15.
Shares shorted have decreased from 50.57M to 39.66M over the last month, a decrease which represents about 10.77% of the company's float of 101.27M shares. Days to cover ratio at 2.36 days.
Performance over the last quarter: 17.93%.
4. GameStop Corp. (GME, Earnings, Analysts, Financials): Operates as a retailer of video game products and personal computer (PC) entertainment software.
Market cap at $4.46B, most recent closing price at $37.53.
Shares shorted have decreased from 38.89M to 34.04M over the last month, a decrease which represents about 4.17% of the company's float of 116.34M shares. Days to cover ratio at 8.92 days.
Performance over the last quarter: 48.93%.
(List compiled by Mary-Lynn Cesar. Short data sourced from Yahoo! Finance, all other data sourced from Finviz.)
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Analyze These Ideas: Getting StartedRead descriptions for all companies mentioned Access a performance overview for all stocks in the list Compare analyst ratings for the companies mentioned Compare analyst ratings to annual returns for stocks mentioned Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filingshhgregg, Inc. (HGG, Chart, Download SEC Filings) Barnes & Noble, Inc. (BKS, Chart, Download SEC Filings) J. C. Penney Company, Inc. (JCP, Chart, Download SEC Filings) GameStop Corp. (GME, Chart, Download SEC Filings)
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