Why True Religion Shares Soared

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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 designer jeans company True Religion (UNKNOWN: TRLG.DL  ) surged 22% today, after its quarterly results and outlook topped Wall Street expectations.

So what: The stock has been hammered over the past year as increasing competition has weighed heavily on results, but today's fourth-quarter beat -- $0.55 on revenue of $137 million versus the consensus of $0.53 and $130 million, respectively -- coupled with upbeat full-year guidance, suggests that the worst may be behind it. In fact, gross margins even widened 20 basis points over the year-ago period, to 64.3%, giving Wall Street a much better feeling about its business mix going forward.

Now what: Management now sees full-year 2013 EPS of $1.89-$1.95 on revenue of $509 million-$513 million, nicely above Wall Street's view of $1.86 and $495 million.

According to Chairman and CEO Jeffrey Lubel:

As we start 2013, our plan is to enhance our men's merchandise offering with sportswear innovation and reestablish the True Religion Brand Jeans women's collection with updated, well-edited core basic denim bottoms and fashion-forward concepts .

With zero debt and a still-reasonable forward P/E of 14, betting on the success of that plan might even be worth the risk.

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

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