I recently lived in Dallas, home to the most individuals with a black belt in shopping, to borrow a phrase from Peter Lynch. So it's no surprise that at nearly every corner, I noticed some type of big-box home appliance and consumer electronics retailer, including Best Buy (NYSE:BBY), CircuitCity (NYSE:CC), and Beaumont, Texas-based Conn's (NASDAQ:CONN). The former two have had their fair share of investment appeal over time, but what about lesser-known Conn's?

First-quarter results released last week were strong. Revenue increased 22%, net income grew by a robust 19%, and diluted earnings per share were up 18% quarter over quarter. Same-store sales growth, an important metric to track in the retailing industry, was up 16.1% -- 11.6% on an adjusted basis. The company made the adjustment as hurricanes Katrina and Rita walloped sales last fall but had an offsetting beneficial impact this time around because of rebuilding efforts in Louisiana and southeast Texas. And as fate would have it, all of the company's stores reside in those two states.

Better yet, management reiterated full-year guidance for the period ending Jan. 31, 2007. It expects diluted earnings of $1.85-$1.90 per share, which includes stock options expenses. That gives a P/E of about 15.5 based off the current share price of $28.83 (as of Monday's market close). Here's a comparison of where that stacks up with the other big box behemoths, including trailing and forward P/E projections based on consensus estimates. As you can see, Conn's has the lowest P/E.



Forward P/E

Conn 's



Best Buy



Circuit City



For a brief comparison of the three in terms of profitability, Circuit City is the clear laggard, with minuscule operating and net profit margins. That's somewhat understandable, though, since it's coming out of a turnaround after a period of poor sales. Conn's actually had better operating and net margins than Best Buy did over the past year, and its five-year numbers are higher as well. And though Best Buy has grown earnings in excess of 20% for the past five years, growth at Conn's has been strong, too, at 13.5% earnings growth annually over the same time frame. As for sales, they've grown slightly faster annually at Conn's (16.5%) than at Best Buy (15.2%) over the past five years.

One knock I have against Conn's is that cash flow from operations is a bit uneven and free cash flow is minimal as management invests to grow its store base to 61 or 62 stores this year, according to its estimates. But long-term debt has been negligible and was completely nonexistent as of the most recent quarter, which means capital is being generated mostly from internally generated funds. The valuation is also lower, but justified, since Conn's is a smaller, riskier company with a limited history as a public company -- even though it has been around since 1959.

Things are usually bigger in Texas, but Conn's is a minnow compared with giant Best Buy and a stabilizing Circuit City. However, its growth and operating numbers do stand up to Best Buy's, and with a current 58 stores in two states, it has plenty of room for expansion. It has also managed to avoid the merchandise and related sales pitfalls that plagued Circuit City until recently. A more conservative investor may choose to stick with Best Buy, and the value guys have done very well with Circuit City, but Conn's has a nice track record in its own regard since its January 2003 IPO. This is one to watch.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned and welcomes your feedback.