An absurdly undervalued buy at the perfect time ($KSS)Financial Condition of Kohl's
Kohl's has been sold heavily in recent weeks as its revenues have declined post Covid-19 and wall-street has repeated the motif that brick and mortar shops are dying. However, it has become so oversold now that it is a worthy investment for consideration, now that it is near its 20 year lows set during the covid pandemic.
Valuation and Ratios
It is a fact that the Kohl's current market capitalization is absurdly low for how large the company is. Kohl's is trading with a P/E ratio of just 6.96 and a market capitalization of 1.69 Billion despite having over 3.8 Billion in shareholders equity. The company's real estate alone was recently valued at over 8 billion. In addition, KSS received buyout offers at $64 a share just two years ago, which management rejected for being "Too Low" (it is now trading at $15.43 a share).
The Opportunity
While most would say it is never a good idea to try to catch a falling knife, for such a large corporation to be priced so cheaply presents a unique opportunity for value investors, and now is the perfect time to buy in for two main reasons which could act as catalysts.
1. The Christmas Effect (KSS goes up an average of 25% every December to April period) and
2. Recent Change in leadership (new CEO Ashley Buchanan is stepping in on January 15th).
This company can turn itself around so easily, and the market will reward it greatly for any such turn-around. We have recently seen many similar stories with dying brick-and-mortar companies like Gamestop and Abercrombie and Fitch being revitalized by new management, and Kohl's in particular has so much capital that it could easily change its trajectory. In addition, as Ashley Buchanan is becoming CEO after guiding a buyout of his previous company, Michaels, there are rumors that Ashley Buchanan may organize another buyout or merger for Kohl's with Apollo Global Management, which of course would come at a great premium to the current price.
