It is already well known at this point that the Street is not loving RadioShack (RSH) and Best Buy (BBY). The former is currently rated near a "sell", while the later is rated closer to a "hold". With the bar set low and the multiples irrationally low, investors can benefit from high risk-adjusted returns. Based on my review of the fundamentals and multiples analysis, I find solid room for appreciation.

From a multiples perspective, both firms are exceptionally cheap. RadioShack trades at a respective 7.6x and 9.4x past and forward earnings while Best Buy trades at a respective 9.1x and 7x past and forward earnings. To put this into perspective, consider that Best Buy is valued at 71% of its historical 5-year average PE multiple versus 49% for RadioShack. Furthermore, RadioShack and Best Buy having a respective 22% and 24.4% free cash flow yield!

At the third quarter earnings call, Best Buy's management noted progress in several areas:

"[T]he key takeaways of the quarter were: we took decisive actions to drive our business, specifically in revenue and market share, both in-store and aggressively online. These actions, while negatively impacting gross margin, significantly resonated with customers and resulted in improved traffic and comp sales, including a significant increase in our online growth. We still have most of the holiday season in front of us, and we are on track to deliver both our revenue and earnings guidance for the year as adjusted. We remain committed to utilizing our strong cash flow to both invest in the profitable segments of our business and improve returns via share repurchases…

On balance, we continue to execute well on, and benefit from, the 3 foundational elements of our strategy: one, our unique multichannel approach that allows us to connect with customers wherever and whenever they want to shop; two, optimizing our scale to drive growth to new categories, new store formats and to gain share in key categories; and three, leveraging our financial strength and flexibility".

The Street will nevertheless continue to hammer into your head the headwinds surrounding Best Buy maintaining its lead in consumer electronics retailing. While it is true that online retailers, particularly Amazon (AMZN) are putting the pressure on margins; secular trends are nevertheless strong. Put differently, Best Buy's size of the consumer electronics retail pie may decline, but that same pie is expanding to more than offset the impact. Moreover, Best Buy can easily leverage the innovation of other companies and it is well positioned to gain the most from a turnaround in consumer expenditures. The company is expanding offerings in Best Buy Mobile, which represents a significant catalyst. Management is aiming for around 600-800 independent Best Buy Mobile stores - a 186% growth from current levels on the high-end. Productivity will further increase as square footage per store declines through subleasing and closings.

Consensus estimates for Best Buy's EPS forecast that it will decline by 1.5% to $3.38 in 2012 and then grow by 9.2% and 6.8% in the following two years. Assuming a multiple of 8.5x and a conservative 2013 EPS of $3.61, the rough intrinsic value of the stock is $30.69, implying 18.6% upside.

RadioShack is suffering from a relentless decline in consumer electronics as it emerges from a disastrous third quarter. With that said, investors are overly doubting the success of a turnaround. Management is making progress in cutting unnecessary expenses, particularly for SG&A, to grow margins per square foot. At the same time, the company will benefit from its recent deal with Verizon and the expansion of Target mobile stores.

Consensus estimates for RadioShack's EPS forecast that it will decline by 44.6% to $0.93 in FY2011, decline by 18.3% in FY2012, and then grow by 3.9% in FY2013. Of the 21 revisions to estimates, all have gone down for a net change of -21.8%. Assuming a multiple of 13x and a conservative FY2012 EPS of $0.72, the rough intrinsic value of the stock is $9.36, implying 24.5% upside.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.