Analyzing 21 Retailers Using Levered Free Cash Flow

Last month I introduced my “back of the envelope” method of analyzing stocks using levered free cash flow and I am very pleased that it got such a positive response from Seeking Alpha’s readers. For those of you who may have missed it, here it is again as an introduction to what I will discuss in this article.

I am writing this article today because I read that Urban Outfitters (URBN) missed their estimates and the stock tanked after hours. That got me wondering if my Levered Free Cash Flow (LFCF) analysis could have helped the investor in URBN to sell before the miss? While I was at it, I thought I would crunch the numbers for 20 more retailers as well and see how they would stack up.

I took some of the most popular retail stocks and ran my Levered Free Cash Flow (LFCF) analysis on them. This methodology that can be found for free on Yahoo Finance’s “Key Statistics.”

I like to buy stocks at 15 times or less and sell at 30 times their LFCF. Always remember that the results detailed below are TTM (twelve month trailing) results and when I do my Mycroft Research Analysis, I always use Value Line’s 2011 OE estimates. Therefore, it is important that when you look at the results in this article you also factor in the growth rates for the company. Before you buy or sell anything, use Value Line to check out 2011 estimates for owner earnings.

So, with the introductions out of the way, let us get down to business:

Here is the list:

Urban Outfitters (URBN)

• Closing Price March 7, 2011 = $37.99
• Levered Free Cash Flow = $197.26 million
• Shares Outstanding = 164.04 million
• Levered Free Cash Flow Per Share = $1.20
• Price to Levered Free Cash Flow = 31.65

Amazon (AMZN)

• Closing Price March 7, 2011 = $169.08
• Levered Free Cash Flow = $1.89 billion
• Shares Outstanding = 451 million
• Levered Free Cash Flow Per Share = $4.19
• Price to Levered Free Cash Flow = 40.35

Home Depot (HD)

• Closing Price March 7, 2011 = $36.87
• Levered Free Cash Flow = $ 3.22 billion
• Shares Outstanding = 1.61 billion
• Levered Free Cash Flow Per Share = $ 2.00
• Price to Levered Free Cash Flow = 18.44

Lowe’s Companies (LOW)

• Closing Price March 7, 2011 = $26.00
• Levered Free Cash Flow = $2.48 billion
• Shares Outstanding = 1.35 billion
• Levered Free Cash Flow Per Share = $ 1.83
• Price to Levered Free Cash Flow = 14.20

Coach (COH)

• Closing Price March 7, 2011 = $54.62
• Levered Free Cash Flow = $742.39 million
• Shares Outstanding = 295.77 million
• Levered Free Cash Flow Per Share = $ 2.51
• Price to Levered Free Cash Flow = 21.76

Wal-Mart (WMT)

• Closing Price March 7, 2011 = $ 52.02
• Levered Free Cash Flow = $7.27 billion
• Shares Outstanding = 3.55 billion
• Levered Free Cash Flow Per Share = $ 2.04
• Price to Levered Free Cash Flow = 25.50

Target (TGT)

• Closing Price March 7, 2011 = $51.30
• Levered Free Cash Flow = $3.78 billion
• Shares Outstanding = 704 million
• Levered Free Cash Flow Per Share = $5.36
• Price to Levered Free Cash Flow = 9.57

The Gap (GPS)

• Closing Price March 7, 2011 = $21.26
• Levered Free Cash Flow = $1.02 billion
• Shares Outstanding = 606.00 million
• Levered Free Cash Flow Per Share = $ 1.68
• Price to Levered Free Cash Flow = 12.65

Kohl’s (KSS)

• Closing Price March 7, 2011 = $53.55
• Levered Free Cash Flow = $776.75 million
• Shares Outstanding = 295 million
• Levered Free Cash Flow Per Share = $ 2.63
• Price to Levered Free Cash Flow = 20.36

Family Dollar (FDO)

• Closing Price March 7, 2011 = $50.59
• Levered Free Cash Flow = $249.82 million
• Shares Outstanding = 126.38 million
• Levered Free Cash Flow Per Share = $ 1.98
• Price to Levered Free Cash Flow = 25.55

The Buckle (BKE)

• Closing Price March 7, 2011 = $ 36.77
• Levered Free Cash Flow = $ 99.77 million
• Shares Outstanding = 46.77 million
• Levered Free Cash Flow Per Share = $ 2.13
• Price to Levered Free Cash Flow = 17.26

Aeropostale (ARO)

• Closing Price March 7, 2011 = $ 25.13
• Levered Free Cash Flow = $ 148.45 million
• Shares Outstanding = 87.97 million
• Levered Free Cash Flow Per Share = $ 1.68
• Price to Levered Free Cash Flow = 14.95

Macy’s (M)

• Closing Price March 7, 2011 = $ 23.26
• Levered Free Cash Flow = $ 1.65 billion
• Shares Outstanding = 423.30 million
• Levered Free Cash Flow Per Share = $ 3.89
• Price to Levered Free Cash Flow = 5.98

J.C. Penney (JCP)

• Closing Price March 7, 2011 = $ 34.41
• Levered Free Cash Flow = $ 71.62 million
• Shares Outstanding = 236.70 million
• Levered Free Cash Flow Per Share = $ .30
• Price to Levered Free Cash Flow = 114.70

Dicks Sporting Goods (DKS)

• Closing Price March 7, 2011 = $ 37.67
• Levered Free Cash Flow = $ 101.49 million
• Shares Outstanding = 116.62
• Levered Free Cash Flow Per Share = $ .87
• Price to Levered Free Cash Flow = 43.29

Best Buy (BBY)

• Closing Price March 7, 2011 = $ 31.81
• Levered Free Cash Flow = $ 1.24 billion
• Shares Outstanding = 394.20
• Levered Free Cash Flow Per Share = $ 3.14
• Price to Levered Free Cash Flow = 10.13

Apple (AAPL)

• Closing Price March 7, 2011 = $ 355.36
• Levered Free Cash Flow = $ 13.88 billion
• Shares Outstanding = 921.28 million
• Levered Free Cash Flow Per Share = $ 15.06
• Price to Levered Free Cash Flow = 23.60

Ebay (EBAY)

• Closing Price March 7, 2011 = $31.50
• Levered Free Cash Flow = $ 992.63 million
• Shares Outstanding = 1.30 billion
• Levered Free Cash Flow Per Share = $ .76
• Price to Levered Free Cash Flow = 41.44

Dollar General (DG)

• Closing Price March 7, 2011 = $ 27.90
• Levered Free Cash Flow = $ 340.32 million
• Shares Outstanding = 341.10 million
• Levered Free Cash Flow Per Share = $ .98
• Price to Levered Free Cash Flow = 28.46

Whole Foods Market (WFMI)

• Closing Price March 7, 2011 = $ 57.87
• Levered Free Cash Flow = $ 383.34 million
• Shares Outstanding = 173.56 million
• Levered Free Cash Flow Per Share = $ 2.21
• Price to Levered Free Cash Flow = 26.18

Staples (SPLS)

• Closing Price March 7, 2011 = $ 20.12
• Levered Free Cash Flow = $ 718.48 million
• Shares Outstanding = 723.20
• Levered Free Cash Flow Per Share = $ .99
• Price to Levered Free Cash Flow = 20.32

So there you have it, a pretty complete picture of the entire retail environment, which took me about an hour to analyze. I am also pleased to report that had an Urban Outfitter shareholder run these numbers before the recent earnings release, he or she would have sold before hand, as it came in at 31.65, a sell according to my LFCF methodology.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.