Comments on: A.G. Kicks Abercrombie While It’s Down http://www.peridotcapitalist.com/2006/03/ag-kicks-abercrombie-while-its-down.html Stock market and investing blog published by Chad Brand, Founder/President of Peridot Capital Sat, 11 Feb 2012 23:26:23 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Chad Brand http://www.peridotcapitalist.com/2006/03/ag-kicks-abercrombie-while-its-down.html/comment-page-1#comment-348 Chad Brand Mon, 06 Mar 2006 21:13:00 +0000 http://www.peridotcapitalist.com/?p=234#comment-348 The teen retail segment is always a volatile one. In fact, ANF always used to trade at a discount to the retail sector and the market. It routinely only fetched 10 or 12 times forward earnings.<br/><br/>However, as the company continued to expand its store offerings (Hollister, etc) it became apparent that they could grow double digits for years to come. The market reacted, and the stock fetched a higher multiple (16x-18x) in recent memory.<br/><br/>Now we have a soft month for same-store sales and the thing gets crushed again. There were a lot of momentum players in it and they have bailed.<br/><br/>Despite the worries in recent days, ANF can still grow 10 to 15 percent per year for many years to come. Their lack of debt and $5 in cash will allow for stock buybacks, which will help them rebound from a lackluster month here and there.<br/><br/>I don't think the current EPS estimates (before the February numbers came out) of $4.30 for 2006 and $5 for 2007 are unattainable due to a disappointing February.<br/><br/>At $56 per share, ANF is trading at an enterprise value to forward earnings ratio of only 12x. We've seen think happen before, and I think it is yet another gift for patient investors who aren't focused on last month's sales numbers (which, by the way, were UP more than 5 percent).<br/><br/>A share price of $70 by year-end is reasonable, in my view. The teen retail segment is always a volatile one. In fact, ANF always used to trade at a discount to the retail sector and the market. It routinely only fetched 10 or 12 times forward earnings.

However, as the company continued to expand its store offerings (Hollister, etc) it became apparent that they could grow double digits for years to come. The market reacted, and the stock fetched a higher multiple (16x-18x) in recent memory.

Now we have a soft month for same-store sales and the thing gets crushed again. There were a lot of momentum players in it and they have bailed.

Despite the worries in recent days, ANF can still grow 10 to 15 percent per year for many years to come. Their lack of debt and $5 in cash will allow for stock buybacks, which will help them rebound from a lackluster month here and there.

I don’t think the current EPS estimates (before the February numbers came out) of $4.30 for 2006 and $5 for 2007 are unattainable due to a disappointing February.

At $56 per share, ANF is trading at an enterprise value to forward earnings ratio of only 12x. We’ve seen think happen before, and I think it is yet another gift for patient investors who aren’t focused on last month’s sales numbers (which, by the way, were UP more than 5 percent).

A share price of $70 by year-end is reasonable, in my view.

]]> By: Andy Kern http://www.peridotcapitalist.com/2006/03/ag-kicks-abercrombie-while-its-down.html/comment-page-1#comment-347 Andy Kern Mon, 06 Mar 2006 20:54:00 +0000 http://www.peridotcapitalist.com/?p=234#comment-347 This stock has always seemed underappreciated to me. I mean, it has consistently grown revenues in excess of 20% for the last ten years and has no debt, yet currently trades at only 16X earnings. They also seem to have been repurchasing shares pretty regularly. Your thoughts? This stock has always seemed underappreciated to me. I mean, it has consistently grown revenues in excess of 20% for the last ten years and has no debt, yet currently trades at only 16X earnings. They also seem to have been repurchasing shares pretty regularly. Your thoughts?

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