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Is Vera Bradley a Buy Near Its 2-Year Low?

Michael Lewis
September 14, 2013

Trading around its two year low -- down 55% from its October 2011 highs -- fashion retailer Vera Bradley (NASDAQ: VRA) delivered estimate-beating results on Wednesday on both the top and bottom lines, but the stock still sank by double digits based on management's very cautious outlook for the remainder of the year -- a line that has been on the tongue of nearly every retail manager over the past couple of months. The thing is, Vera Bradley is a distinguished brand that consumers recognize well, and, in a better macro-spending environment, store traffic should normalize. Does this mean Vera Bradley shares are undervalued on this week's sell-off? Let's take a closer look to find out.

Earnings recap
Despite what is now well known as a horrible quarter for retailers, Vera Bradley managed to bump up its adjusted earnings per share by a respectable 12%, hitting $0.37. The number comes in four cents higher than the year-ago quarter, and ahead of Wall Street's average expectations of $0.32 per share. Sequentially, earnings grew more than 60%.

The top line grew modestly, but (again) ahead of analyst estimates. The company had sales of $125.4 million -- a 4% gain, and roughly $1 million ahead of estimates. E-commerce accounted for 22% of sales, a gain of 1% from the prior year. Management cited the usual factors -- weather conditions and economi