Joe's Jeans: Undervalued Stock at a Bargain Price

Joe's Jeans Inc. (JOEZ) designs, produces and sells apparel and apparel-related products to the retail and premium markets under the Joe's® brand and related trademarks.

• JOEZ TTM Earnings Growth rate is 15.4, higher than 83% of its competitors.
• JOEZ TTM P/E is 8.2, so JOEZ isn't even priced as high as its growth rate, meaning it's severely undervalued (by almost 50%).
• If JOEZ was priced fairly, it would have a PEG of 1 and would be priced at 1.0199 dollars. Guess where that is ... 1.0199 is almost exactly where the upper trendline on the monthly chart is ... so we know that, based on our fundamentals, we could certainly test that level again soon.
• Average P/E for Industry: 21.0

JOEZ TTM P/E is uptrending for the first time since 2007. As this figure increases, so will the PPS.

JOEZ has zero debt and its cash flow is steadily increasing for the most part:

• Q2 2008 - 2,551
• Q3 2008 - 3,117
• Q4 2008 - 3,465
• Q1 2009 - 2,165
• Q2 2009 - 6,760

JOEZ Price/Book ratio suggests JOEZ is undervalued:

• JOEZ: 1.07 Indusry: 2.93

JOEZ Price/Sales ratio suggests JOEZ is SEVERELY undervalued:

• JOEZ: .60 Industry: 14.29

JOEZ Price/Cash Flow suggests JOEZ is undervalued

• JOEZ: 7.50; Industry: 13.10

Lastly, JOEZ is sitting on a critical support level right now as its indicators begin to turn up from being oversold. JOEZ is a STRONG BUY.

Chart courtesy of StockCharts.com:

Full Disclosure: I own shares and am LONG on JOEZ.

Comments

[Curtd1]

I've been watching this stock on my watchlist for some time now. Sounds like it's time to start a position in JOEZ.

Great breakdown on the Technical and fundamental sides Red!

Curt

2009 Aug 28 01:03 PM

[SuperMegaDope]

Red,

I have been following this stock since Aug 21st. Great research on this, I have to agree with you 100%, it is way undervalued. Looks like we bounced off of support Wed and have resumed the climb. Is this a long term for you or just hanging in untill we it shows signs of overbought? I get a little skittish with faddish clothing trends, got crox? :)

For your great DD on this stock I am now following you and hope to see more picks in the near future.

--SMD

2009 Aug 28 01:59 PM

[Guildcrantz]

Spot on analysis...

One thing you forgot is the increasing gross margins from about 42% to 50% this past quarter.

Joez has done a great job outsourcing their production to Mexico & Morroco, they have successfully opened 2 full price retail & 2 outlet locations & they have started licensing, handbags, kids & belts so far.

All of these thing contribute to higher margins/profits.

Guildcrantz

2009 Aug 28 04:12 PM

[Jeff Andry]

Good points Guild. I very much agree. Really any serious JOEZ investor should check out their Q2 Earnings Call Transcript available right here on SA.

seekingalpha.com/artic...

And thanks Curt, Super. I am very long on JOEZ. Appreciate y'all droping in.

2009 Aug 28 09:08 PM

[Jeff Andry]

dropping* in.

And nice day here!

2009 Aug 28 09:09 PM

[Jeff Andry]

From their July 9th PR, JOEZ will be participating in the Project trade show this week in Las Vegas. This could potentially bring a lot of attention our way. Wish them luck!

2009 Aug 30 02:03 PM

[A Mac]

Coota! Great article, glad to see your time spent in the law library has honed your skills as a financial analyst. Keep up the good work, hope there's more to come.

Alex

2009 Sep 14 02:09 PM

[Jeff Andry]

EPS of .03 just announced. JOEZ up to .88 (10.04%) in AH trading.

2009 Oct 15 04:41 PM

[SuperMegaDope]

Jeff, what a call and it looks like JOEZ has some more room to run. When is your your next pick.....?

2009 Oct 20 10:57 PM

[mrpev7]

Jeff,
With 3rd quarter numbers in and 4th looking to be very good what is next for Joez stock price. Company seems to be doing things right and interest is picking up.
I think estimates are far to low in both top line and bottom for both next quarter and 2010. Your opinion would be appreciated.

Thanks,
Mike Peverill


On Aug 28 09:08 PM Jeff Andry wrote:

> Good points Guild. I very much agree. Really any serious JOEZ investor
> should check out their Q2 Earnings Call Transcript available right
> here on SA.
>
> seekingalpha.com/artic...
>
>
> And thanks Curt, Super. I am very long on JOEZ. Appreciate y'all
> droping in.

2009 Oct 23 10:36 AM

[Jeff Andry]

mrpev7,

Assuming JOEZ closes above a dollar in each of the next four trading days, it will have met its Nasdaq Continued Listing Requirement and thus will no longer be listed as deficient. This, coupled with the fact that JOEZ is now trading above a dollar, will, in my opinion, lead to two things:

1. Mr. Crossman stated in the Q2 Conference Call that he felt the biggest thing holding new investors back from buying shares of JOEZ was its sub-dollar status. Now that JOEZ is back above that level, I think new investors will be much more likely to put their money in a stock that has not only performed well during the recession, but has exponential room to grow.

2. JOEZ is still undervalued relative to its industry and sector. Now that it is trading above a dollar, I think the market will find it worthy of receiving a P/E valuation that is more in line with its peers. I think that JOEZ' FMV is between $1.75-$2.10.

But this FMV is based on right now. Q4 will be when JOEZ absolutely blows up IMO. As stated in their most recent conference call, their balance sheet in that quarter will reflect an income tax benefit to the tune of 16-19M. Applicable towards earnings, this would see them take in 30 cents/share in the fourth quarter (by the company's own estimation - also found in their Q3 Conference Call).

I highly recommend everyone listen to that discussion which can be heard in full here:

web.servicebureau.net/...

2009 Oct 25 08:34 PM

[mrpev7]

Thanks Jeff and i am in total agreement. With the CC for 4th quarter being out right bullish with the added tax kicker things are looking up.
Where is the price level you see mutaul funds entering?


On Oct 25 08:34 PM Jeff Andry wrote:

> mrpev7,
>
> Assuming JOEZ closes above a dollar in each of the next four trading
> days, it will have met its Nasdaq Continued Listing Requirement and
> thus will no longer be listed as deficient. This, coupled with the
> fact that JOEZ is now trading above a dollar, will, in my opinion,
> lead to two things:
>
> 1. Mr. Crossman stated in the Q2 Conference Call that he felt the
> biggest thing holding new investors back from buying shares of JOEZ
> was its sub-dollar status. Now that JOEZ is back above that level,
> I think new investors will be much more likely to put their money
> in a stock that has not only performed well during the recession,
> but has exponential room to grow.
>
> 2. JOEZ is still undervalued relative to its industry and sector.
> Now that it is trading above a dollar, I think the market will find
> it worthy of receiving a P/E valuation that is more in line with
> its peers. I think that JOEZ' FMV is between $1.75-$2.10.
>
> But this FMV is based on right now. Q4 will be when JOEZ absolutely
> blows up IMO. As stated in their most recent conference call, their
> balance sheet in that quarter will reflect an income tax benefit
> to the tune of 16-19M. Applicable towards earnings, this would see
> them take in 30 cents/share in the fourth quarter (by the company's
> own estimation - also found in their Q3 Conference Call).
>
> I highly recommend everyone listen to that discussion which can be
> heard in full here:
>
> web.servicebureau.net/...;c=2343&m=was&...

2009 Oct 26 09:00 AM

[Jeff Andry]

I think they are probably already buying. John Hancock small cap fund bought 4M shares worth in August. The stock is much more attractive to funds now than it was then. So I think it likely they're scooping up shares now, especially now that we've regained our compliance.

2009 Nov 04 12:25 PM