Growth Prospects of Macy's

1981 Words8 Pages
Part 1 Given the market sentiments prevailing in the market, I believe the stock price of Macy's Inc. will be extremely higher than it is today. This notion hinges primarily on the low valuation placed on Macy's stock. Currently, the stock is trading at a P/E ratio of 12 with the market historically trading at a ratio of 13-16. With the significant growth prospects of Macy in regards to its retail franchise, I believe the stock in undervalued relative to the market. Furthermore, the company just released first quarter earnings that were 38% higher than those of a year earlier. This indicates increased consumer sentiments in regards to both shopping and purchasing goods at Macys Inc. Macy's operates primarily in the retail industry with operations globally. As a retail franchise, the performance of the stock can be attributed to shopping behavior within the broader economy. Currently, the economy is revering from the greatest recession since the great depression. As such, consumers are slowly purchasing luxury and higher margin items from Macys. This indicates a shift in consumer sentiments, which I believe, will prevail long after the futures contracts become due. In fact, as the economy recovers, Macys will benefit in two profound ways. First, its earnings will increase substantially as consumers begin to purchase more products. Furthermore, the valuation placed on those earning will increase. This valuation can be attributed to the P/E ratio mentioned earlier. If this
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