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Shares of fashion retailer Kenneth Cole trade at near four-year lows after investors and consumers were unimpressed by the firm's attempt to penetrate the luxury footwear market. Q3 profits fell 63% year-over-year, but Barron's says the quarter did carry some signs of encouragement. Same-store sales gained 8% during the quarter, and Cole continues to shed weaker locations. "The stock and the company have endured much pain, but the stars are aligning," says Esplanade Capital's Shawn Kravetz, who thinks even a "modest turnaround" in Cole's retail sales could add $0.11/share to 2008 earnings. Other analysts think a new men's sportswear line due in February and a 25th-anniversary ad drive could see earnings jump from $0.65/share this year to $0.86 in 2008 -- and to $2.50-3 a share within four years. Net of its $5/share in cash, P/E is a reasonable 15x, and shares sell for less than 1x sales, vs. 5x sales for rival Coach. With a debt-free balance sheet and 4% dividend, risk to investors is minimal. Kravetz has been a buyer -- he thinks shares ($18) could hit $50.

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