Macy's may be undervalued with poor growth indicators, but the 12 analysts following the company give it an rating of hold. Their target prices range from $11.0 to $19.0 per share, for an average of $14.75. At today's price of $14.7, Macy's is trading -0.37% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.
Macy's, Inc., an omni-channel retail organization, operates stores, websites, and mobile applications in the United States. Based in New York, NY, the mid-cap Consumer Discretionary company has 94,570 full time employees. Macy's has provided a 4.4% dividend yield over the last 12 months.
Macy's has a trailing twelve month P/E ratio of 6.0, compared to an average of 22.33 for the Consumer Discretionary sector. Considering its EPS guidance of $2.76, the company has a forward P/E ratio of 5.3.
The average compound growth rate of the company's last 6 years of reported earnings per share is -3.2% (the company doesn't issue forward EPS guidance). On this basis, the company's PEG ratio is -1.47, which indicates that its shares are overpriced.
On the other hand, the market is potentially undervaluing Macy's in terms of its book value because its P/B ratio is 0.97. In comparison, the sector average P/B ratio is 3.12. The company's shares are currently -61.3% below their Graham number, indicating that its shares have a margin of safety.
So why are analysts giving M a bad rating? We believe analysts could be alarmed by the company's dissapointing -11.3% rate of cash flow growth over the last 6 years. Furthermore, Macy's has slim margins as you can see in the financial summary below.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $24,837 | $24,971 | $24,560 | $17,346 | $24,460 | $24,442 |
| Gross Margins | 39% | 39% | 38% | 28% | 39% | 37% |
| Operating Margins | 8.0% | 7.0% | 4.0% | -26.0% | 10.0% | 7.0% |
| Net Margins | 6.0% | 4.0% | 2.0% | 0.0% | 6.0% | 5.0% |
| Net Income (MM) | $1,566 | $1,108 | $564 | $0 | $1,430 | $1,177 |
| Net Interest Expense (MM) | $321 | $261 | $205 | $284 | $256 | $175 |
| Depreciation & Amort. (MM) | $991 | $962 | $981 | $959 | $874 | $857 |
| Earnings Per Share | $5.1 | $3.56 | $1.81 | -$12.68 | $4.55 | $4.19 |
| Diluted Shares (MM) | 307 | 311 | 311 | 311 | 314 | 281 |
| Free Cash Flow (MM) | $1,489 | $1,078 | $636 | $311 | $2,358 | $727 |
| Capital Expenditures (MM) | $487 | $657 | $972 | $338 | $354 | $888 |
| Net Current Assets (MM) | -$580 | -$693 | -$1,748 | -$1,262 | -$1,453 | -$790 |
| Long Term Debt (MM) | $5,469 | $4,677 | $4,852 | $3,295 | $2,996 | $2,997 |
| Net Debt / EBITDA | 2.54 | 2.21 | 2.77 | -0.89 | 0.88 | 0.99 |
