Salomon Smith Barney upgraded its rating on Dillard's (DDS

) to buy from neutral.

Analyst Richard Church says Dillard's is significantly undervalued relative to its asset value. He says this been a long-held view on the company, but at Dillard's current price, the risk/reward relative to asset value is more compelling than at any time over the last few years. He adds that progress has been made in reducing inventories, and that management taken a more aggressive approach to clearance. Church raised his $14 target to $40-plus.