Why Office Depot Shares Soared

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of office-supply specialist Office Depot (NYSE: ODP  ) jumped as much as 20% today after the retailer and some of its peers affirmed a positive full-year outlook.

So what: Speaking at the Goldman Sachs retail conference, management said it still expects an adjusted operating profit of $125 million to $135 million for the year, which would be about a 5%-10% improvement over last year's figure.

Now what: The huge gain in share price is more of a reflection of the stock's overall weakness than any significant good news. The stock is still down 50% from its 52-week high and worth just a fraction of what it was when it topped $40 back in 2006. At a P/S of just $0.04, shares might look incredibly cheap, but considering macroeconomic factors like the transition to online retail and digital communication, the office-supply superstore concept does not seem long for this life. I'd stay away.

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Fool contributor Jeremy Bowman holds no positions in the companies in this article. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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Related Tickers

10/21/2016 4:00 PM
ODP $3.26 Down +0.00 +0.00%
Office Depot CAPS Rating: **