Best Buy = Best Bet

Best Buy Co. BBY wasn't having much expected from it with its slow TV sales and consumer PCs, until two weeks ago when Best Buy crushed its earnings number for 2Q, according to Barron's. Barron's writes that "the stock is inexpensive, even after its recent run-up, selling at around 11 times the consensus forecast of $3.57 a share for the fiscal year ending in February and 10 times the $3.91 expected for fiscal 2012. Both multiples are well below Best Buy's five-year average P/E ratio of nearly 17 on trailing 12-month earnings." Second-quarter results showed strong evidence of Best Buy's operating finesse. Although SSS in the U.S. dropped by 1% and flat-screen TV revenue slid by double-digits, earnings rose smartly (by 1.3 percentage points to 25.7%) and saw an increase in its operating margin of 1.1 percentage points to 3.6%. Both increases indicate an improved sales mix (bigger sales of higher-margin smart- phones and computer tablets) and cost discipline.