Staples: An Interesting Retail Stock

Per some of our previous posts, it is getting harder and harder to find interesting large-cap consumer discretionary stocks. Many of the well known retail concepts like Target or Nordstrom are breaking down, while some of the luxury names, like Coach or Ralph Lauren are locked in persistent declines.

There is one company where we can make a solid case: Staples.  Below is our relative strength point and figure chart, which shows the stock slowing emerging from a multi-year downtrend.



Low valuations is another positive for Staples.  One of the techniques we use to measure value is to calculate normalized ratios.  Here, all we do is divide current price by trailing 5-year average metrics.  At 3.4x normalized, intangible-adjusted cash flow, Staples is quite cheap compared to other specialty retailers.