Current Price: $12.50
Industry: Clothing Retailer
The Company is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 11 to 18 year-old young women and young men.
What I like:
- Consistent, year-over-year growth of both sales and profits. Sales are up from $1.6 billion in 2008 to $2.4 billion in 2011. This growth in sales rate well above the industry average which has remained fairly stagnant at 0.28%.
- No debt on the balance sheet. This company is opening more and more stores, but using its profits to do so and not taking on any future liabilities.
- ROA and ROI are well above industry averages. Employee efficiency ratios do the same.
- Look around any suburban mall. Alongside with the Abercrombie, AE and Hollister shirts on teenagers and young adults, you'll now see just as many Aeropostle shirts. This company is growing amongst that group but investors haven't yet caught on to how popular this brand is becoming.
What I don't like:
- Lets face it, the clothing industry is a fickle one. Today's flavor is tomorrow's laughed-at trend. This stock probably isn't for the long haul as of yet, as there trends haven't caught on with parents, who tend to stick with those brands much longer (see The Gap or Banana Republic).
- Retained earnings are lower as the company bought back some common shares. Whether this means the company has to take on additional debt to expand its store base remains to be seen.
- This stock has had a recent rebound up to its current price. I liked it better a few days ago when its stock price was around $11.50.
Verdict: I think this stock is still a definite buy. The company is expanding and becoming more popular. It's stock price has been at a high of $27.73 in the last 52 week period. While I don't know if it will reach quite that level again any time soon, I see no reason it can't get around $20/share.
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