With all the ‘mid-season sale’ signs around Sydney’s Pitt Street Mall lately, it looks like retail is going through one of its regular rough patches. In fact we said ‘the first quarter of 2017 looks like a difficult one’ when reviewing Myer, the department store company, in Myer: Result 2016 last month.
We usually encourage buying on bad news, but poor market sentiment runs a close second. While Myer’s turnaround will be lengthy and the stock remains speculative, there’s a decent probability that profit growth beyond 2017 will be stronger than the market expects. With the stock trading on an enterprise value to operating profit before interest, tax, depreciation and amortisation multiple of under five times, you’re not paying for much upside. SPECULATIVE BUY.