The Pep Boys Manny Moe & Jack undertaking a strategic review

Jul 13th, 2015 – Comment

The MACD and the RSI are not currently indicating that we can expect another burst to the upside in the near term.


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PBY LOGO

Hello Lou,

I’ve been watching this stock for some time. Can you conduct an analysis on this one?

Thanks!
Jeff

 

Hey Jeff,

 

Thanks for the assignment. This will be the first time that I inspect the charts for The Pep Boys  Manny Moe & Jack (PBY NYSE). The company has 800 locations in thirty five states in the U.S. and Puerto Rico that retail automotive parts and accessories. They also offer maintenance and service. Management has been pushing to grow comparable store sales, improve gross margin returns, shrink inventory, and unlocking real estate values. But progress hasn’t satisfied their biggest shareholder.

The company has been getting pressure from GAMCO Asset Management Inc and recently granted them three seats on the board of directors. On June 30, 2015 the PBY announced that it was going to undertake a strategic review in response to third party inquires.

The stock has moved higher on this news and now the question becomes is there more in the tank for this stock. A look under the hood will provide the tools for the evaluation of  PBY.

 

 

PBY

The three-year chart features the lift off that started in April of 2015 as the shares bounced off support at $8.50. The reaction was catalyzed as GAMCO declared its intention to promote its nominees for the board of directors. The move higher broke above the downtrend line that had been in place since November of 2014 when the shares traded close to $14.00.

By early June a golden cross surfaced indicating that there was more to come. The stock ran to $12.50 by the end of the month where it has met resistance.

 

 

 

 

 

 

PBY2

The six-month chart depicts the pullback from the overbought condition that led the shares to the 52-week high of $12.62. The MACD and the RSI are not currently indicating that we can expect another burst to the upside in the near term.

What you also need to evaluate is the strategic review that is currently underway. If the process determines that the best way to enhance shareholder value is to sell the company you could see a deal done but there are no guarantee that it will happen or at what price. The historical high for the stock came in 1996 when it traded for $37.00 which I don’t think is in the cards this time around.

Next time I will inspect the charts for Russel Metals Inc. (RUS TSX) for Norman.

Make it a profitable day and happy capitalism!

 

 

 

 

 

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