One lowly line in Urban Outfitters' (NASDAQ:URBN) recently filed Form 10-Q is being blamed for a 20% plunge in the retailer's share price yesterday. It can be amazing what a line of legalese can do.

The good times can't last?
Urban Outfitters reported a splendid third quarter, and like fellow retailer The Buckle (NYSE:BKE), it has proven to be one of the retail anomalies in these troubled times. Urban Outfitters' third-quarter net income increased 31% while sales surged 26% and comps increased by 10%. That's an incredibly impressive showing given consumers' recent reluctance to spend.

However, Urban Outfitters revealed in its 10-Q that same-store sales in November were flat. It also disclosed in the filing, "The Company believes, based on current uncertainty and volatility in the marketplace, its possible comparable store net sales may further decelerate during the remainder of the holiday season."

Well, color me shocked, and yes, that's sarcasm. This can't come as a surprise to anyone who has been following the retail environment. We've had no shortage of dire warnings from retailers about the current quarter; some, like the one from Best Buy (NYSE:BBY), might make your hair stand on end. It's no secret that that "possibility" of decelerating sales during the holidays is one many retailers are facing right now.

Meanwhile, Urban Outfitters CEO Glen Senk even said in the conference call related to its earnings release on Nov. 13, "The sales trend thus far in November has slowed from our brisk October pace, and while we cannot forecast the fourth quarter, we certainly expect the months ahead to be challenging and we are prepared to respond."

Get a grip, people
It seems to me that investors really need to count to 10 and breathe before freaking out on this stock. As much as I'm a firm believer in seeking out the information disclosed in SEC filings -- you can often ferret out a lot, including negative tidings. It's no reason to panic, either. Overall, Urban Outfitters is a unique, high-quality retailer that I've followed for ages; it is very well run by a management team that really knows its customers.

The bottom line is that it has excelled while many other retailers have really stumbled over recent months, and I'd say that says a lot about this retailer's excellence. And even if the poor economy takes its toll, which of course was always a common-sense concern, it's still ahead of the game since it has savvy management and a unique business model -- positive attributes for the long haul.

Look at perennial loser retailers like Chico's (NYSE:CHS), Talbots (NYSE:TLB), and Gap (NYSE:GPS), which have struggled to coax sales even before we entered the current hard times. Those are the types of stocks that investors should ditch in the current environment.  

Urban Outfitters' stock price has long suffered from a logic disconnect. Even as it did remarkably well over the past couple of months, its shares got slammed with the broader market's negative sentiment. It's now trading near levels it hit when it was facing a serious turnaround several years ago. (Incidentally, it pulled off that turnaround in record time and in admirable fashion -- again, I cite Chico's, Talbots, and Gap as examples that should remind us that turnarounds are not easy, and sometimes investors get burned waiting years for improvement in sales and operations. Sometimes improvement never comes.)

There are many retailers out there at the moment that are overburdened by onerous debt loads. Urban Outfitters has no debt (other than operating leases, which are common practice among retailers but are, admittedly, obligations and a form of debt), and it has cash and marketable securities of $196.1 million. Even better, in the first nine months of the year, Urban Outfitters generated $38.7 million in free cash flow.

Getting absurdly undervalued?
Urban Outfitters is now trading at just 10 times forward earnings. Gap's trading at the same multiple, but it hasn't been able to jump-start its sales and is a far more mature retailer, complete with tired-out brands. Hot Topic's (NASDAQ:HOTT) trading at a wacked-out 17 times forward earnings, and as far as I can tell, hasn't shown the kind of operational strength to justify that kind of premium in the least.  

Urban Outfitters has delivered more than 20% annual growth over the past five years and is still targeting delivering 20% growth in sales and earnings going forward. Even if growth does slow due to the economy, I doubt it would be anywhere near as dire as the current multiples seem to imply. Although a tough holiday quarter might open up even cheaper opportunities, I think this is a great opportunity to get this quality retail stock for a bargain price.

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.