Analysts look at the composition of ROE in relation to margins...

Analysts look at the composition of ROE in relation to margins and in relation to asset turnover and equity to assets mix:

ROE =(net profit/sales) * (sales/assets) * ( assets/equity)

The above equation says that ROE is a function of the net profit margin multiplied by the asset turnover or sales per asset which gives return on assets. And then we multiply the return on assets by the equity ratio

So in our case, because we dont carry much debt , we gotta look the the margins, and also make sure that the asset turnover ( sales / assets) dsnt turn lower with ppl saying that theyre opening stores at sub optimal locations

But the PE has shrunk bigtime already - we've dropped 25% or so in value; A PE of 10-11 is conservative!

CDs Dvds that cost 10-15bucks are pretty much demand inelastic - - -ppl will always shell out 10-15 bucks on these if they feel like spending......rather than spending 50-100+bucks on a shirt or jeans at DJs; The electronics section might suffer....but games dvds movies demand wont change that much IMO coz theyre so cheap and an easy buy decision . The youngsters that earn money spend it all ....and theyll keep spending it in basic things like dvds and movies

The internet may affect sales by a little bit for the savvy buyer and for the hardcore tech heads thatll download movies etc

I reckon 2012 the EPS will grow by 10% or so if anything due to new store openings adding to revenue and profit -- -thats already pretty much priced in.

This is the LEADER in retail by a country mile and PE circa 10-11 is a good buy IMO if they can maintain EPS and grow it by 10% or so for the next few years

I can only see the price falling to 12-13bucks if they come with a profit warning that therell be NO GROWTH in 2012 , OR, no growth in stores that are already open and consequently margins drop in a bad way and asset turnover drops likewise