Expressed in percentage terms above, we look at the 9 June closing price relative to the mean of analyst estimates to determine a potential discount or premium thereto.
While the recent run in Richemont suggests the company to be trading more or less at a fair value relative to analyst price targets, The Lewis group might be considered to be trading at a more than 7% premium to what is generally considered fair value.
The rest of the retailers in our list look to be trading at variable discounts to the mean of analysts’ estimates, with the most pronounced discounts being that of Woolworths Holdings and Steinhoff International.
Recent interim results released from Steinhoff International disappointed investors as some of the new acquisitions performances included within the results (particularly that of the Mattress Firm), had been worse than consensus estimates had predicted. However, while many 12 month price targets have been revised lower by analysts, the majority of investment houses remain in favour of the stock outperforming and maintain their buy, overweight or outperform ratings for the company. The decision to separately list the company’s African assets in the third quarter of the year has been widely considered as a value unlock for investors, providing a more direct access to the Pepkor business, which makes up the bulk of the value within the assets being separately listed. Pepkor remains one of the best discount retailers in the country, achieving continued earnings growth whilst remaining extremely cash generative.
Woolworths delivered a subdued set of results for the interim period ending December 2016, and cautioned that the remainder of the year (ending June 2017) will follow suite. The company does however appear to remain in analyst favour, due to the company’s historically high Return on Equity (ROE), cash generative nature and strong upper LSM positioning within the Southern Hemisphere. Future growth in a muted global growth environment will be dependent on the successful execution of the Country Road turnaround strategy as well as Australian food and private label roll outs.