It's been a busy couple of weeks for teen apparel retailer Deb Shops (NASDAQ:DEBS). Two weeks ago, the company announced a special dividend payment of $6 per share -- to be paid from the company's cash hoard instead of debt. Then last week, it issued a positive earnings report, with earnings per share of $0.20 vs. last year's $0.06. The special dividend is a great sign for shareholders invested in a company that has a reputation for being tight with cash, and the operational improvement is nothing to sneeze at, either.

Investors can trace the increase in earnings to the company's ability to hold the line on selling, general, and administrative expenses (SG&A), and on depreciation expense, as well. Both of these are the result of the fact that Deb Shops is pursuing a reasonable store-expansion policy and closing underperforming stores. These factors allowed the increase in sales at existing stores to largely fall through to the bottom line. The company also received a sizeble boost to its earnings per share from the interest on its cash balances, but with the special dividend payment looming, that amount should decrease in the coming quarters.

Deb Shops is also debt-free and experienced a strong 6.9% same-store sales increase in the first quarter. The strong same-store sales number easily trumps those handed in by a number of retailers recently. It's somewhat surprising, but given the same-store sales performance, it appears that Deb Shops is doing a better job of pulling in teen shoppers than Motley Fool Stock Advisor pick Gap (NYSE:GPS) and Limited Brands (NYSE:LTD). The company believes it can keep up the performance for the rest of the year, too. It raised its guidance by about 5%, to $1.45 to $1.55 per share, for the year.

At a trailing P/E of 21 and enterprise value-to-free cash flow of about 12, Deb Shops' shares are not wildly priced given the strong expected earnings performance and the special dividend payment. Particularly when you consider that after the special dividend payment, the company will still have over $6 in cash per share sitting on the balance sheet and it pays out a respectable $0.125 per quarter in regular dividends as well.

While it appears the market is finally realizing an interesting value, it's important to consider how long the company can hold onto the hearts of notoriously fickle teen shoppers. Admittedly, this isn't something I have a good grasp on, so I'll be passing for now, but should the shares get cheaper, I'd be intrigued enough by the balance sheet strength to take a second look.

For more on Debs Shops, check out the following articles:

Nathan Parmelee has no financial interest in any of the companies mentioned.