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Will Bulls Re-Emerge In Time To Hold Nordstrom's Uptrend Intact?

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Will Bulls Re-Emerge In Time To Hold Nordstrom's Uptrend Intact?
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Nordstrom, Inc. (NYSE: JWN) shares had a magical run from the 2009 low in the low teens to the 2015 peak at just above $80 – truly remarkable considering this is a retail store chain.

Since peaking earlier this year, however, the stock has pulled back over 10% even as the broader equity market and many of its retail brethren have remained buoyant to some degree.

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Was the run up to $80 justified or will there be a price to pay for those longs overstaying their welcome?

Let's go to the fundamentals and technicals for Nordstrom to get a better picture:

What the bulls see in Nordstrom

Some cheap valuation metrics:

  • An enterprise value of $16.47 billion versus a market capitalization of $13.94 billion
  • A price-to-sales ratio of only 1.02
  • 5.13% net profit margins that spin off over $245 million in levered free cash flow annually

Impressive management effectiveness ratios:

  • A return-on-assets of 8.82%
  • A return-on-equity of 30.84%
  • A decent short-term balance sheet as evidenced by the current ratio of 1.84

What the bears see in Nordstrom

Some expensive valuation metrics:

  • A PE of 18 versus estimated revenue and EPS growth for the next year of 7.9% and 10.7%
  • A price-to-book ratio of 5.53

Some troublesome balance sheet metrics:

  • Cash of only $769 million versus total debt of $3.15 billion
  • Total debt-to-equity ratio of 123.13%

The technical take on Nordstrom shares

Nordstrom shares have had a tough go of it recently – and that fact is not only apparent to technicians, but to everyone. However, the technicians note that the drop is effectively working off an overbought short-term condition and could be playing right into the hands of aspiring bulls.

They note that the long-term uptrend line comes into play at approximately $69.23 – which is where the hungry bulls will be looking to make a stand. Resistance for the stock comes in at both $78.04 and $80.32.

Overall

Nordstrom stock should have a bit more downside ahead before technical buyers can more confidently step in and place their orders. The question will then become whether the company's fundamentals will be enough to propel the stock higher and reward those willing to take a shot at the long side near support.

The answer to that question – especially considering the company's debt load and valuations – is less than clear.

Posted-In: Technicals Trading Ideas Best of Benzinga

 

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