Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, apparel brands licensor Cherokee (Nasdaq: CHKE) has earned a respected four-star ranking.

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

Cherokee facts

Headquarters (Founded)

Van Nuys, Calif. (1988)

Market Cap

$148.3 million


Apparel, accessories, and luxury goods

Trailing-12-Month Revenue

$31 million


CEO Henry Stupp (since 2010)

CFO Mark DiSiena (since 2010)

Return on Equity (Average, Past 3 Years)



$8.8 million / $0

Dividend Yield




Nike (NYSE: NKE)

V.F. Corp (NYSE: VFC)

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

On CAPS, 96% of the 558 members who have rated Cherokee believe the stock will outperform the S&P 500 going forward. These bulls include euroazn and cbaines2.

Just last month, euroazn tapped Cherokee as a potent income opportunity: "It's undervalued, and it pays a fantastic dividend of slightly under 5% (and this is a cut dividend. What if it goes back up again ... yum)."

Cherokee even boasts an almost unbelievable three-year average operating margin of 60.6%. That's substantially higher than that of listed foes like Gap (12.3%), Nike (13.1%), and V.F. Corp (12.5%).

Last September, CAPS member cbaines2 elaborated on the bull case:

Cherokee is a fabulous yet relatively unknown franchise. Their business model is as simple as apple pie: Collect royalty revenue and then distribute it to shareholders in the form of a dividend. Cherokee practically makes money out of thin air through licensing popular clothing brands to Target and other major retailers. A whopping 18 employees (not a typo) generate[d] $13.7 million in free cash flow [in fiscal 2010].

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