Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, infant- and baby-clothes maker Carter's (NYSE: CRI) earned a respected four-star ranking.

With that in mind, let's take a closer look at Carter's and see what CAPS investors are saying about the stock right now.

Carter's facts

Headquarters (founded)

Atlanta (1865)

Market Cap

$1.5 billion


Apparel, accessories, and luxury goods

Trailing-12-Month Revenue

$1.6 billion


CEO Michael Casey (since 2008)
CFO Richard Westenberger (since 2009)

Return on Equity (average, past 3 years)



$245.0 million / $233.4 million


The Children's Place (Nasdaq: PLCE)
Gymboree (Nasdaq: GYMB)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 98% of the 307 members who have rated Carter's believe the stock will outperform the S&P 500 going forward. These bulls include BigFatBEAR and MagicDiligence.

Just last month, BigFatBEAR touched on Carter's solid fundamentals: "Increasing equity, stable margins, responsible cash and debt positions."

As the leading player in children's apparel, Carter's stands in a nice position to benefit from the surging number of births we've seen in recent years. Munchkin-focused retailers Children's Place and Gymboree also offer ways to play the trend, but market share-dominating brands, coupled with a surprisingly lower PEG, make Carter's the far more enticing choice. Gap's "Baby Gap" offerings, of course, don't represent a large enough part of its business to make it a pure baby boom bet.

While Wal-Mart's (NYSE: WMT) recent move to reduce floor space for one of Carter's brands has certainly hurt sales in the first half of the year, CAPS All-Star MagicDiligence thinks the stock has too many long-term positives to ignore:

For one, children's clothing is a less volatile business than standard apparel. While adults will bargain shop in a recession, and teens are constantly changing fashion allegiances, parents and grandparents usually do not put as strict a lid on spending for the little ones, and fashion is a lesser concern. ...

Demographic trends are also favorable. The U.S. is in a mini "baby boom" right now. More babies were born in 2007 than in any year in the country's history, and the 2000-2009 period was the highest decade for births since the 1950's, by far. ...

There are some risks here. Several big chain retailers have been looking to move to private label clothing to improve their margins. [Wal-Mart's] floor space reduction for Child of Mine has hurt. ...

Overall, though, Carter's looks like an attractive Magic Formula investment. ... Taking into account 2011 projections, modest growth rates, and historical multiples, I believe a good sell price for the stock is about $35.

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