Rue21 Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of value-oriented teen retailer Rue21 (Nasdaq: RUE  ) surged 16% on Friday after its quarterly results and full-year outlook topped Wall Street expectations.

So what: Driven by an impressive 26% jump in revenue and widening margins, the company posted a first-quarter profit of $9.6 million, or $0.38 per share, versus the average analyst estimate of just $0.30 per share. Rue21 has been succeeding at the expense of gorilla discounters like Wal-Mart (NYSE: WMT  ) and TJX Companies (NYSE: TJX  ) in recent months, and judging from the share price action, Mr. Market expects its affordable, yet fashionable, offerings to continue to grow in popularity.

Now what: Management now expects full-year earnings per share of between $1.50 and $1.54, handily topping analyst forecasts of $1.21. So even with today's big rally, Rue21 shares are trading at a reasonable -- given its strong operating momentum -- 20 times the midpoint of that range. When you couple that decent forward valuation with a cash-rich, debtless balance sheet, Rue21 is at least worth checking out.

Interested in more info on Rue21? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Wal-Mart. The Motley Fool owns shares of Wal-Mart. Try any of our Foolish newsletter services free for 30 days.

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