This stock came out of earnings in rather bad shape, and has since been notably diverged from the price performance of European retailers, so it is interesting to note that short interest has come down significantly in the last 5 days and the stock is flagging up as a potential sector-relative value opportunity…
Risk sentiment indicators
Although short interest is low in absolute terms, interesting to note that it has come down significantly in the last 5 days and over the last 1 month (making this notably divergent to the 1 month negative price action).
Home Retail Group is arguably starting to look attractive in terms of valuation, being at its recent lows in absolute terms, vs. the FTSE All Share and vs. the retailing space.
Stacked Graph page
Note how such lows in sector-relative valuation have historically offered an inflexion point in terms of price action (in both cases the stock was below its 50D and 200D moving averages).
EPS Momentum Page
Recent price action looks overly severe given the downward revisions in 12m fwd EPS…does the market expect more downgrades to follow? The stock currently trades at a 12% discount to consensus sell side analyst price targets.
We see clearly from the spread chart, on a 2 year view, that such underperformance the versus the Stoxx Retail sector has historically offered an inflexion point.
However, very interesting that the FCF dividend cover is forecast to be so low in FY1 and FY2…could this be a potential risk?