How much more of a run does Foot Locker, Inc. (FL) have? Shares of this Zacks #1 Rank (Strong Buy) are near 5-year highs. Yet there's still plenty of value as the company trades with a forward P/E of just 12.6.
Foot Locker is a specialty athletic retailer with 3,360 stores in 23 countries in North America, Europe, Australia and New Zealand. It also has 36 franchised stores in the Middle East and South Korea.
Best Quarter Ever
On May 18, Foot Locker reported its fiscal first quarter results and blew by the Zacks Consensus Estimate by 12.2%. Earnings were a record 83 cents which was 38% higher than the year ago quarter, which saw 60 cents per share.
It continued an impressive earnings surprise streak of 9 quarters in a row going back to 2009.
Sales jumped 8.7% to $1.6 billion from $1.45 billion a year ago. Same store sales were also hot, rising 9.7%.
Merchandise inventories were also under control, falling 1.1% to $1.1 billion compared with a year ago.
Share Buy Back
During the quarter, Foot Locker repurchased 878,700 shares for about $27 million under its previously announced $400 million share repurchase plan.
It has plenty of cash. At the end of the quarter, net of debt, it had a total cash position of $774 million, an increase of $111 million over the prior year.
It is already using some of that cash to reward shareholders. The company pays a dividend currently yielding an attractive 2.4%.
2012 Zacks Consensus Estimate Jumps
7 estimates have moved higher since the first quarter earnings report which has pushed the fiscal 2012 Zacks Consensus Estimate up to $2.38 from $2.32 per share.
That is earnings growth of 31% as Foot Locker made just $1.81 last year.
The growth is expected to slow a bit in fiscal 2013, with earnings expected to rise another 9.6%.
Shares Soar, But There's Still Value
Shares have been on a tear since the 2009 recession.
They recently touched 5 year highs and are threatening that level again.
Yet, there is still value in the shares. In addition to a P/E under 15, which is my cut-off for value, it has a price-to-book ratio of 2.1. A P/B ratio under 3.0 usually means there is value.
Foot Locker has other value fundamentals including a price-to-sales ratio under 1.0, at 0.8. A P/S under 1.0 can indicate a company is undervalued.
Shoes and athletic wear are still hot. Foot Locker is a rare growth stock that still has plenty of value.
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