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A Discounter Diviners Missed

Inside Wall Street


Discount retailers had a magnificent 1991, and few rose more mightily than the handful that specialize in office products. Two chains, Staples and Office Depot, tripled their share prices during the year. Staples now trades at 70 times 1991 earnings, while Office Depot's p-e of 63 is only a little less steep.

Are there any reasonable values left? One smart, far-from-overpriced pick in that arena is Intelligent Electronics. Intelligent, which operates the BizMart chain of 72 cut-rate office-supply stores in the Midwest and west of the Continental Divide, has also been a standout stock performer. The shares doubled in 1991 on the strength of a 30% gain in sales and earnings. But the company hasn't attracted the kind of attention on the Street that has elevated the shares of its pricey peers in office retailing. At 47 1/4, the stock is trading at only 21 times the $2.21-a-share it earned in the fiscal year that ended last October. That has caught the eye of William Keithler, who runs the Financial Dynamics mutual fund in Denver. "Discounters and value-oriented stores have the most earnings momentum, and for a discounter, Intelligent is comparatively cheap," he says.

Keithler expects the company to earn $2.60 a share in the fiscal year that ends next October. And that's not pie in the sky--some analysts are predicting as high as $3 a share or higher. Even if Keithler's conservative estimate holds, it means the shares are now trading at only about 14 times projected earnings. And if Intelligent Electronics gets half the p-e that has propelled fellow discounters, its stock could hit 90 this year.GARY WEISS

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