Inflation is scary.
It means prices are skyrocketing.
In March, the Consumer Price Index, which shows the prices of U.S. goods and services, jumped 7.9% on a 12-month basis.
But if you drill deeper into the numbers, you can see that not every sector experienced the same increases in prices.
Take a look:
While COVID-19 took its toll on clothing stores — with some closing or declaring bankruptcy — the apparel sales industry is making a huge comeback, even when inflation is high.
In 2020, department stores in the U.S. alone saw sales drop 17% from the previous year because of COVID-19.
But as you can see in the bar chart above, that’s changing. The global department store market is poised to grow from $1.4 trillion in 2020 to $2.2 trillion by 2025 — a massive 57% increase!
My latest high-conviction Power Stock is Dillard’s Inc. (NYSE: DDS).
Dillard’s operates 282 stores across the southern U.S., including 32 clearance centers and an e-commerce store.
DDS scores a “Strong Bullish” 98 out of 100 on our Stock Power Ratings system, and we expect it to beat the broader market by 3X in the next 12 months.
DDS: All the Quality You Want in a Retail Stock
Dillard's stock stands out to me for two notable reasons:
- The company’s stock closed in on analysts’ target price ($275 per share) and looks to surge ahead of Wall Street’s expectations.
- Its sales were $4.4 billion in 2020 but rose to $6.6 billion last year — 50% more than the same period last year.
You won’t find many stocks better than DDS in terms of quality.
Dillard’s return on its equity (ROE) is 59%. This tells us that the company does an outstanding job generating income.
For context, the general merchandise retail average ROE is only 25%.
The company’s return on assets (ROA) is 27.2%, meaning Dillard’s management effectively manages its capital (the higher the percentage, the better).
The peer average ROA is just 5.7%.
DDS stock surged 198% in the past year. That crushes its peers — they fell 3%.
What’s more, DDS is about $15 above its 50-day simple moving average (the green line in the chart above). We consider that a bullish sign.
This stock hits the mark on fundamental factors and experienced strong momentum leading into the recent market sell-off.
Dillard’s Inc. stock rates a 98 overall — it’s in the top 2% of all stocks in our universe.
That also means we’re “Strong Bullish” on the stock and expect it to beat the broader market by at least three times in the next 12 months.
The stock tops all but 4% of the stocks we rate in quality. It trades with a 0.8 price-to-sales ratio and a 3.6 price-to-book value ratio — scoring a 96 on value.
This stock boasts a one-year annual earnings-per-share growth rate of 999% and a one-year sales growth rate of 49.4%. DDS has even more room to run!
Stay Tuned: Top Play on Homebuilders
Remember: We publish Stock Power Daily five days a week to give you access to the top companies that our proprietary Stock Power Ratings identify!
Stay tuned for the next issue, where I’ll share all the details on a Strong Bullish stock to play the rise in homebuilding!
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.