Bed, Bath & Beyond (BBBY) is a retailer that specializes in high quality goods for the home and for heartfelt events; it operates a total of 1,533 stores, including 994 Bed Bath & Beyond stores, in all 50 states, explains Hilary Kramer, growth and income expert and editor of Value Authority.

The company also also owns buybuy BABY, The Christmas Tree Stores, Harmon’s Face Value discount cosmetics and Cost Plus World Market furniture and decor stores.

It has been a very rough five years for the company, which saw its stock peak at $80.18 in January 2014. What went wrong is not a mystery. The company enjoyed very high profit margins that were not sustainable in an age of increased competition from online retailing.

Operating income fell from $1.5 billion to $422 million from the January 2015 to the January 2019 fiscal years, while earnings per share (EPS) fell from $5.07 to $2.05 over the same period.

These poor results, along with its plunging stock price, gave birth to a group of activist hedge funds seeking to make changes at the company.

These activist investors just got their wish, as the Board of Directors removed long-time CEO Steven Temares and appointed new Board Member Mary Winston as the CEO on an interim basis. Ms. Winston has had a long retail career, most recently serving as CFO of Family Dollar.

The stock initially rose on the news but fell due to concerns that tariffs will raise the company’s cost of merchandise. In addition, I believe the timing of the move shortly after the end of the fiscal first quarter raised suspicions that the quarter may have been disappointing, and indicates why incumbent board members may have decided that it was time to yield to pressure from activists and remove Mr. Temares.

However, expectations are already low for the first quarter, which is also a less important one for BBBY seasonally. The stock is very cheap at 7.5X earnings per share (EPS) estimates for the year, so there is some margin of safety should estimates need to come down.

Another interesting way to look at BBBY’s valuation is its Enterprise Value to Revenues figure, which stands at a very low .21. With the stock so cheap compared to revenues, any success in lifting profit margins will be rewarded meaningfully by the market.

Therefore, I would like the hear more from the company’s new management before giving up in the stock. Buy BBBY under $16. My new target is $20.

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