ODP Corp. (ODP): A Strong Buy Amid Undervaluation and Positive Sentiment

The ODP Corporation (ODP), operator of the Office Depot and OfficeMax brands, is emerging as a compelling value investment amid starkly undervalued metrics, robust industry dynamics, and a favorable technical backdrop. With a Forward P/E ratio of just 6.41—nearly half the industry average—and a Zacks Rank of #1 (Strong Buy), ODP presents a rare opportunity for investors seeking exposure to a misunderstood company with improving fundamentals. Let's dissect the data and uncover why now is the time to act.

Valuation: A Discounted Gem in an Overvalued Sector

ODP's valuation metrics stand out as a stark contrast to its peers in the Retail-Miscellaneous sector. Its Forward P/E of 6.41 is 51% below the industry average of 13.17, while its PEG ratio of 0.4 (vs. 2.63 for the sector) suggests the market is pricing in minimal growth expectations despite the company's undervaluation. This creates a compelling asymmetry: investors pay only $6.41 for every dollar of projected earnings, far below the industry's $13.17 multiple.

The company's fair value range of $31.11–$40.47—calculated via relative valuation methods—implies an undervaluation of 41% compared to its current price of $18.30. Even with projected declines in annual EPS (-8.18%) and revenue (-5.83%), the stock's metrics suggest the market is overlooking its intrinsic value. A P/B ratio of 0.69 and FCF Yield of 11.41% further underscore its appeal, as these metrics reflect strong cash flow and undervalued assets.

Technical Analysis: Outperformance and Momentum

ODP's stock has quietly outperformed broader markets and its sector peers in recent months. While the S&P 500 has treaded water, ODP's price action reveals a bullish divergence:

The stock has also held support near $17.50, with rising volume on recent rallies—a sign of institutional buying. Technical indicators like the RSI (currently neutral at 55) and MACD (bullish crossover in late May) signal a shift from correction to accumulation. Pairing this with a Zacks Rank #1, which factors in short-term momentum and analyst revisions, strengthens the case for a long position.

Catalysts: Earnings, Stability, and Industry Tailwinds

1. Upcoming Earnings (Q2 2025): Analysts project a $0.33 EPS for Q2, a 41% year-over-year decline. While this reflects tough comparisons to 2024's post-pandemic boom, the consensus has been stable—no downgrades in the past month. A beat or guidance upgrade could spark a rerating.
2. Industry Strength: The Retail-Miscellaneous sector ranks #27 in Zacks' industry rankings, placing it in the top 11% of all industries. This reflects broader tailwinds for office supply retailers as businesses recover from pandemic-era cost-cutting.
3. Estimate Revisions: ODP's Zacks Rank #1 is driven by positive estimate revisions—a 10% increase in bullish sentiment over the past month. Historically, this has correlated with 12–18% upside in the following quarter.

Risks and Considerations

• Revenue Declines: ODP's -9.19% projected revenue growth raises questions about long-term demand. However, the P/S ratio of 0.08 (82% below the industry) already prices in this risk.
• Profitability Volatility: A trailing P/E of -13.13 (due to 2024 losses) highlights past instability. Yet, forward earnings are expected to turn positive, suggesting a fresh start.

Investment Thesis and Actionable Advice

ODP's combination of undervaluation, stable analyst sentiment, and improving technicals positions it as a standout value play. Here's how to act:

• Buy now: Target the current price of $18.30, with a stop-loss below $17.50.
• Hold for 6–12 months: The fair value range ($31–$40) suggests 70%+ upside, even excluding catalyst-driven volatility.
• Monitor earnings (July 2025): A beat or positive outlook could accelerate the stock's ascent.

Final Thoughts

ODP Corp. is a classic value trap turned opportunity. While challenges like revenue declines exist, the stock's valuation discounts these risks to an extreme. With a Zacks Rank #1, a Forward P/E half the sector's, and a favorable industry backdrop, ODP offers asymmetric risk/reward for investors willing to look past short-term noise. This is a buy now, hold for growth scenario—one that could pay off handsomely in the coming quarters.