Is the Market Mispricing Macy's Compared With Other Retail Stocks?

• Shares successful section store concatenation Macy's are up astir 33% twelvemonth to date, but the banal continues to commercialized astatine a large discount to its retailer competitors.

• There are valid reasons for this valuation discrepancy; however, it could besides enactment to your advantage.

• If vacation play results beryllium amended than expected, this banal could person an unanticipated boost aboriginal successful the caller year. On a longer clip frame, Macy's could acquisition large valuation expansion.

• 10 stocks we similar amended than Macy's ›

Year to date, shares successful section store retailer Macy's (NYSE: M) person performed strongly, surging by astir one-third. Compare this to the show of the S&P 500 index, which is up by astir 15% implicit the aforesaid clip frame.

However, portion Macy's has outperformed, it continues to commercialized astatine a discount to its closest nationalist peers. There is simply a beardown rationale down this, but astatine the aforesaid time, this could enactment to your advantage.

Why? With the banal inactive undervalued, shares whitethorn person sizeable country to run, particularly implicit the adjacent fewer years.

At existent prices, the famed section store retailer trades for astir 12.5 times guardant earnings. For comparison, Kohl's Corporation (NYSE: KSS) trades for much than 20 times guardant earnings, and Dillard's (NYSE: DDS) trades for astir 34 times guardant earnings.

Yes, to immoderate extent, this is an apples-to-oranges comparison. After all, investors expect some of the competitors to acquisition an net rebound successful the coming fiscal twelvemonth ending January 2027.

Still, adjacent adjusting for this, Macy's inactive appears precise undervalued. Sell-side analysts estimation Kohl's volition study net per stock (EPS) of $1.23 successful 2027. Dillard's net the twelvemonth aft adjacent could travel successful astatine $27.92 per share.

Forecasts for Macy's telephone for net of $2.21 per stock successful 2027. Hence, Kohl's presently trades for astir 17.5 times its estimated 2027 earnings, Dillard's trades for 22.5 times its estimated 2027 earnings, but Macy's trades for conscionable 10.1 times its estimated 2027 earnings.

Yes, there's a substantive crushed down Wall Street's discounting of Macy's. In December, erstwhile the institution past released quarterly earnings, it besides provided guidance for Q4 FY2026, which covers the vacation buying season.

While gross guidance of $7.35 cardinal to $7.5 cardinal came successful somewhat up of expert forecasts, which called for $7.3 cardinal successful sales, EPS guidance of $1.35 to $1.55 fell beneath forecasts, which called for EPS of $1.58.