Should Investors Play It Safe With Genesco Stock?

GCO is up more than 55% year-over-year

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The shares of Genesco Inc. (NYSE:GCO) are up 2% to trade at $64.26 this morning. The security has been trading mostly sideways since surging to a Nov. 18, roughly five-year high of $73.72, stuck between a floor at the $56 level and a ceiling at the $66 mark. Shares still have the support of the 200-day moving average, however, despite a handful of brief dips below this trendline. Longer term, Genesco stock sports a 55.6% year-over-year lead. 

GCO 200 Day

Short sellers have been piling on the equity of late. Short interest added 25% over the last two reporting periods, and the 1.08 million shares sold short now account for 7.9% of the stock's available float, or more than one week's worth of pent-up buying power.

Short-term options traders have rarely been more call-biased, however. This is per the security's Schaeffer's put/call open interest ratio (SOIR) of 0.06, which sits higher than just 7% of readings from the past year. 

It's also worth noting the stock sports attractively priced premiums. GCO's Schaeffer's Volatility Index (SVI) of 49% stands in the relatively low 16th percentile of its annual range, meaning options traders' volatility expectations are ice-cold at the moment.

From a fundamental point of view, Genesco stock is seemingly undervalued by most metrics. The equity trades at a forward price-earnings ratio of 9.23, and a price-sales ratio of 0.39, both of which are low values for a small cap. 

However, GCO offers little growth opportunity, having increased revenues just 6.5% since 2019. Moreover, the company doesn’t hold the greatest balance sheet, with just $281 million in cash, and $734 million in total debt. Nevertheless, the retailer has made significant strides towards increasing its profitability in recent years, making it a decent option for value investors.

 




 
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