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An Analysis of NTM P/E and LTM ROE in the S&P 500's Retail Sector

Sep 10, 2018

  • We selected these 76 names in the S&P Retail sector to include in a scatter plot, comparing each company’s NTM P/E and LTM Return on Equity (ROE).  
  • Genesco (GCO), Groupon (GRPN), Signet Jewelers (SIG), and Trip Advisor (TRIP) are considered ‘expensive’, all with negative LTM ROEs despite reasonable NTM P/Es.  
  • O’Reilly Automotive (ORLY), Camping World Holdings (CWH), TJX Companies (TJX), and Kroger (KR) are considered ‘cheap’, all with NTM P/Es below 22.0x while maintaining high LTM ROEs, all above 50%. 
  • As retail companies move more operations online and towards e-commerce, expensive valuations are becoming more acceptable given the potential for high returns on capital, as seen in Amazon (AMZN) and Netflix (NFLX). 


Source: Capital IQ