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Abercrombie & Fitch (NYSE:ANF) is up more than 25% in early trading on a big earnings beat and raised guidance. I have been and continue to be positive on the company's turnaround. I also believe this is one more recent positive for competitor Aeropostale (NYSE:ARO), which reports it quarterly results at the end of the month. Investors looking a cheap retailing play with possible catalysts should consider the shares, especially if they pull back from their initial pop off of ANF's results.

Here are key recent catalysts for ARO:

  • The company should also benefit from lower cotton prices that Abercrombie cited in its better-than-expected earnings report when it provides its results at the end of November.
  • FBR Capital raised its rating from "Market Perform" to "Outperform" last week.
  • Standpoint Research also raised its rating from "Hold" to "Buy" last month.

Aeropostale operates as a mall-based specialty retailer of casual apparel and accessories. It has over 900 stores in the United States, Canada, and Puerto Rico.

Here are four additional reasons why ARO is a solid value play at just over $13 a share:

  1. The company has grown revenues at better than a 20% annual rate over the last decade. Sales growth is expected to around 5% for this fiscal year and FY 2013 and the stock sports a reasonable five-year projected PEG (1.19). The company also has little exposure to contracting Europe, unlike Abercrombie.
  2. The 17 analysts who cover the stock have a mean price target of over $17 a share on ARO. S&P also has a $17 price target on the stock along with a "Buy" rating.
  3. The stock sells at the very bottom of its five-year valuation range based on P/S and P/B. The company has over $150 million in net cash on its books (some 15% of market capitalization).
  4. The stock looks like it has built some technical support as just under the current price level. It also sold for north of $20 a share a few months ago (see chart).

Click to enlarge image.

Source: Abercrombie's Huge Beat Bodes Well For Aeropostale