Staples: An 'Easy Button' to Profits?

Posted Sep 9th 2010 2:30PM by Wade Hansen
Filed under: Staples Inc (SPLS)

If you're looking to hit the "easy button" and make some money in the stock market, you might want to look at Staples (SPLS).

Goldman Sachs -- citing the firm's growing market share and moves to buy back stock -- recently placed Staples on its Conviction Buy List and raised its price target from $22 to $23.

Of course, the stock is going to have to break out of the downtrend it has been in for the past few months before this looks like an attractive technical trade, but the fundamentals are starting to line up.

Watch for the stock to break up above the down-trending resistance level that runs along the stock-price peaks that were formed in April, June and late-July before entering this trade.

Analyst Expectations: Looking ahead to next quarter's earnings announcement, analysts expect Staples to earn $0.40 per share -- which is $0.01 more than the company made during the same quarter last year.

Deutsche Bank, one of the last firms to issue a rating on Staples, reiterated its coverage with a Buy rating and adjusted its price target from $28 to $26..

Fundamental Analysis: Staples has a good fundamental outlook -- based on the return on equity (ROE) the company is providing and the stock's PEG ratio.

Staples has an ROE of 13.09%. When you compare that to Office Depot, Inc.'s (ODP) ROE of -49.92% and OfficeMax Inc.'s (OMX) ROE of 10.08% -- two other stocks in the Specialty Retail, Other industry -- you can see that Staples is providing a solid return to its owners.

Staples has a PEG ratio of 1.12 -- which is below the industry average of 1.75. Typically, a PEG ratio less than 1 is a sign the stock price is not overvalued.

Technical Analysis: Staples has lost 5.04% during the past month and is currently trading above its 20-day moving average but below its 50-day and 200-day moving averages.

Disclosure: Hansen does not own shares of the stocks discussed above. Positions can change without notice.

Tags: goldman sachs conviction buy list, inthenews, spls, staples