There's a point where investors should look at a stock's performance and ask, "What's the justification?" Department-store stock Dillard's
At my last check, Dillard's shares have surged more than 6% in just today's trading. Granted, Dillard's did report healthy June same-store sales growth of 6%, beating analysts' estimates of a 3.3% increase.
However, June looks like it was a pretty good month for retailers overall. Department store rival Macy's
Dillard's doesn't exactly deserve investors' unbridled euphoria, though, even if it did knock June comps out of the ballpark. The stock has surged about 160% in the last year. Although Dillard's has managed to increase its earnings per share by 115.9% in the last 12 months, its total revenue growth has been either decreasing or anemic for years running. Sales growth of 1.1% in the last 12 months is nothing to write home about.
Investors are paying way too much for Dillard's right now. It's trading at about 16 times trailing earnings. Compare that with Target
Occasionally, a retailer is just so darn good at what it does that it deserves premium prices. Look at Costco
I believe Dillard's shares are shockingly overpriced, and that investors buying in now are taking a terrible chance. If you disagree, tell me why in the comments box below, or add additional thoughts on this stock's long-term prognosis. Or just add it to your Fool watchlist to see what happens next.
Alyce Lomax does not own shares of any of the companies mentioned in her personal portfolio. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.