Ivy Capital
Long/short equity, value, special situations

Joe's Jeans: Undervalued

Joe's Jeans (NASDAQ:JOEZ) has intrigued me for some time because it shows the potential to become an established luxury brand in the designer jeans market. Coupled with its low stock price, some indications of an economic recovery in the U.S., and the history of similar jeans makers becoming buyout targets (e.g., True Religion, Seven for All Mankind, J Brand), it is worth examining the stock's valuation. Joe's is currently trading around $1.10 per share. At this price Joe's is undervalued, even accounting for some significant and identifiable risks.

According to its 3rd Quarter 10-Q, Joe's broke even for the quarter: it had $0.00 per share in earnings. However, Joe's recently acquired another high-end jeans maker,...

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