In today’s market, there are no shortage of ways to invest in the rebounding housing market. However, it’s tough to find one that’s still cheap.

#-ad_banner-#The major homebuilders have already had a solid rebound, along with banks and home improvement retailers, but there is still one overlooked play on the housing market and rebounding economy.

This particular retailer was a great investment last year, up 45% — but after hitting its 52-week high earlier this year, it’s down 20% year to date. Given the recent pullback, this company is no longer just a growth story, but a value play at that.

Trading at just 13 times earnings, more than 25% below its historical average, Bed Bath & Beyond (Nasdaq: BBBY) has proven to be one of the more resilient retailers in the brick-and-mortar space. At a time when the likes of Amazon.com (Nasdaq: AMZN) is taking market share from brick-and-mortar stores, Bed Bath & Beyond has seen its sales grow at an annualized rate of 12% over the past three fiscal years.

BBBY fell off a cliff after third-quarter results came in below consensus expectations for both the top and bottom lines. Although revenue and earnings missed estimates, it’s worth noting they were up year over year. The weakness could also have been a byproduct of the severe weather.

With its breadth of products, Bed Bath & Beyond remains a low-cost way for homeowners and renters alike to spruce up their homes. It truly is a one-stop shop for household shopping, and with over 1,100 stores, Bed Bath & Beyond has quite a geographical footprint across the U.S.

	Flickr/kennejima
	Bed Bath & Beyond remains a low-cost way for homeowners and renters alike to spruce up their homes. And with over 1,100 stores, Bed Bath & Beyond has quite a geographical footprint across the U.S.

In the long run, Bed Bath & Beyond expects to operate over 1,300 Bed Bath & Beyond stores across the U.S. and Canada. It also plans to expand its recently acquired brands, Linens ‘n Things and Cost Plus, across the U.S. But as the company approaches its long-term target for store growth, it’ll be relying more on same-store sales and margin expansion to increase its earnings.

As a result, I’m encouraged by the fact that Bed Bath & Beyond is also working toward upgrading its mobile site and apps to make a stronger push into the e-commerce channel. Once shoppers have a bit more money in their pockets, Bed Bath & Beyond’s merchandising strategy should help drive traffic. This is where the company aligns its merchandise offerings and products with the regional preferences of its stores.

Bed Bath & Beyond also has an opportunity to transform its massive coupon campaign into a loyalty program. With a loyalty program in place, Bed Bath & Beyond would have better control over merchandising and margins.

Bed Bath & Beyond doesn’t pay a dividend, but it’s not unreasonable to think the company won’t in the near future. Last year, the retailer pulled in close to $1 billion in free cash flow. Although it returns a lot of that to its shareholders through buybacks, income-focused investors would love to see a dividend. Its balance sheet has over $3 of net cash per share with zero debt, meaning the company has the financial stability to pay a dividend when it chooses.

But despite not paying a dividend, it remains steadfast in its buyback program. Last fiscal quarter, Bed Bath & Beyond bought up 2.3 million shares, worth over $170 million. Some $1.7 billion, which is over 12% of its outstanding shares, remains under its current share buyback program, which is expected to be completed by the end of fiscal 2015.

Risks to Consider: Bed Bath & Beyond relies heavily on consumer spending, and if unemployment remains elevated, that will mean delayed growth. The company’s top-line growth could weaken if store growth slows and it’s forced to rely on its current store base.

Action to Take –> Putting BBBY’s average historical price-to-earnings (P/E) multiple of 17.5 on expected fiscal 2014 earnings per share of $4.85 yields a $85 price target. That’s 30% upside from current levels.

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