One of last week's biggest sinkers was Conn's (NASDAQ:CONN), tumbling 18.5% after posting mixed financial results and offering uninspiring guidance. The furniture, mattress, and consumer electronics retailer is clearly off to a rough start this month, a sharp contrast to last April, when the stock more than doubled in a single month. 

In the latest results, revenue slipped 3% to $420.4 million, as gains in credit revenue were more than offset by another period of declining retail sales. Margins improved, with adjusted earnings clocking in at $0.56 a share. Analysts were holding out for a profit of $0.54 a share on $428.7 million in revenue. Guidance calls for the negative store-level sales trend to carry over into the new fiscal year. 

A Conn's Home Plus exterior shot.

Image source: Conn's.

Giving Conn's some credit

Declining revenue at Conn's isn't a deal breaker. The stock more than tripled last year, despite posting what are now back-to-back fiscal years of declining sales. The decline is by design. Conn's stopped carrying some profit-slurping categories, and it's making great strides in improving its credit profile. 

Conn's has been burned in the past by selling big-ticket items to deadbeat buyers on credit, but now it's beefing up its financing standards. The end result is that store-level sales may be down, but the same can be said about credit delinquencies. All of Conn's major categories outside of home appliance sales declined during the holiday-containing quarter. 

It's hard to applaud a comps decline of 8% -- new stores and the uptick in credit revenue held the top-line slide at 3% -- and the market may be ready for a new tune. Guidance calls for a 3% to 5% dip in comps during the current quarter.

One of last year's hottest stocks has now shed nearly a third of its value in 2017, but not everyone is turning on Conn's. KeyBanc analyst Bradley Thomas put out an encouraging note following the stock's post-earnings slide late last week. He's sticking with his bullish overweight rating and $42 price target. He continues to see this as a credit turnaround story, something that will drive bottom-line results through the next two years.

The 118-store chain may also start looking attractive to value investors if the shares keep sliding. The stock is now trading for less than 12 times this new fiscal year's projected earnings. Competition may be brewing in the form of online specialists, but it's hard to bet against Conn's. It has turned its credit portfolio around, and now the attention needs to shift to sales growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.