A convergence of business and general stock market weakness has put some high-quality stocks on super sale. Among other tantalizing bargains, now's a great time to buy shares of Urban Outfitters (Nasdaq: URBN ) .
The Philadelphia-based company's gotten dressed down by pessimism right now, and its new look isn't pretty. Shares have fallen 25% in the last year.
The retailer's struggling with weakening sales. CEO Glen Senk dealt the latest blow to investors' confidence at a Goldman Sachs conference last week, where the company revealed that thus far, its third-quarter same-store sales are down. "We don't blame the economy for our performance, we blame ourselves," Senk said.
The retailer's expected to report earnings of $1.46 per share in its latest fiscal year, after generating a profit of $1.60 per share in the year ended January 2011. However, don't forget that in the last 12 months, Urban Outfitters has increased sales by 11.7%. That's not too shabby in an overall weak retail market.
Furthermore, Urban Outfitters has experienced fashion misses in the past, and its management proved its mettle in turning things around fast. Investors who bought Urban Outfitters shares in August 2006, when so many investors had left the stock for dead, would be sitting on a 78% total gain right now after years of better days.
Even sweeter for bargain-hunting investors, Urban Outfitters is currently trading at just 13 times forward earnings, and its PEG ratio is a dirt cheap 0.90.
Many retailers have struggled with a nearly perpetual state of malaise, unable to orchestrate meaningful turnarounds. Talbots (NYSE: TLB ) , American Eagle Outfitters (NYSE: AEO ) , and Gap (NYSE: GPS ) all fit into that dubious category.
Urban Outfitters is a far more sound investment, given its historical growth. Take a look at these comparisons of five-year compound annual growth rates:
|
Company
|
5-Year CAGR, Revenue, LTM
|
5-Year CAGR, Net Income, LTM
|
|
Urban Outfitters
|
15.4%
|
15.5%
|
|
Talbots
|
(9.7%)
|
NM
|
|
American Eagle Outfitters
|
3.6%
|
(11.9%)
|
|
Gap
|
(1.5%)
|
3.4%
|
Source: Capital IQ, a unit of Standard & Poor's. NM = not meaningful.
I have faith in CEO Glen Senk's ability to turn the business around. Meanwhile, given Urban Outfitters' strong collection of brands and its history of getting its groove back fast, now looks like a great time for long-term investors to snap up this stock.
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