1 Great Stock That's Still Pretty Cheap

Everyone loves a bargain, and in the world of retail, Macy's (NYSE: M  ) is one of the best bargains out there. The company has had strong growth over the past four years, and its plan for the future is solid. Management seems to understand the consumer environment, and takes customers into account when it builds the business. On top of that, Macy's is on the cheaper side, no matter how you slice it. Here's a rundown of why you should consider this solid American brand.

Then and now
We won't dwell on the past, since it's not going to help us predict the future, but it would be silly not to hit the highlights. Starting at the top, Macy's has increased its revenue for four years running, and it hit $27 billion in 2012. Earnings per share have kept up as well, rising from $0.78 in 2009 to $3.29 last year. That's a 321% increase over four years. To put some context around that, Nordstrom (NYSE: JWN  ) has grown earnings per share by 78% over the same period.

Most recently, Macy's has come off a strong start to the year. The end of the first quarter, which finished in January, saw a great deal of foot traffic, and comparable sales grew 3.9%. That growth should push through into 2013, and has boosted the growth that the company has seen through its websites. Online sales were up 48% last quarter, due to the strength of Macys.com and Bloomingdales.com.

The company has guided 3.5% comparable growth for the coming year , which would make four years in a row of growth -- a first for Macy's. One of the key initiatives in place for Macy's is its training program, which is helping turn the shopping experience into a two-way conversation. That not only helps sales, but it helps deter showrooming, where customers browse in-store then buy online somewhere else. The long-term prospects for Macy's look very sound.

Good value
The strength of the business is the most important part of the equation, but there are plenty of other strong businesses. Nordstrom, for instance, has seen fantastic growth and has some cutting-edge omnichannel plans in place. The reason I like Macy's so much is that it encompasses a lot of the good things that Nordstrom is doing, but it costs less.

In fact, with a P/E of 14, Macy's comes in comfortably under the department store average of 16. It's also kicked out a sustainable 2.2% average dividend over the past five years, which is in line with the average for department stores.

Overall, Macy's is a cheap, solid business with an incredibly strong brand. As more chains fall by the wayside, Macy's should be in line for even more business in the coming years. I love the long-term outlook for this company, and I love the price.

Another department store stock to consider?
J.C. Penney's stock cratered under Ron Johnson's leadership, but could new CEO Mike Ullman present the opportunity investors have been waiting for? If you're wondering whether J.C. Penney is a buy today, you're invited to claim a copy of The Motley Fool's must-read report on the company. Learn everything you need to know about JCP's turnaround -- or lack thereof. Simply click here now for instant access.


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