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Regional to national growth stories and takeover targets are gems that Wall Street traders love to play. Anyone hunting for a company that offers a chance at both should take a good look at Conn's (NASDAQ:CONN).

Headquartered in Beaumont, Texas, Conn's is an appliance and electronics store aimed at creating a more personal atmosphere than can be had at larger box stores like Lowe's (NYSE:LOW) or The Home Depot (NYSE:HD). Evidently, they've had immense success. Since 2000, Conn's has doubled the amount of stores it has operating as it has grown from 28 to 56 locations. Gross revenues have also doubled in the same time while total debt is only a third of what it was five years ago. Today, Conn's ranks as the 8th largest appliance and 66th largest consumer electronics retailer in the country.

Many of the company's locations are situated in the Gulf Coast area, with a major presence in both Houston and Baton Rouge. Conn's benefited greatly from the increase in sales due to the destruction of Hurricane Rita and stands to gain even more as the hurricane season picks back up in June.

The profitability and growth capability in the Conn's franchise makes it attractive to investors and acquisition activity alike. It doesn't seem unlikely to suggest that a buy-out offer could surface inside the next 2-3 years. However there is a concern of just how much of this attractive growth can continue. The appliance and home wares segment is very competitive with the likes of Wal-Mart (NYSE:WMT) and home improvement stores doing their best to give it to the little guy. And competing with Best Buy (NYSE:BBY) and Circuit City (CC) for electronics dollars is almost always an exercise in masochism.

Nevertheless, with a P/E in the low 20s and projected growth to be in the 30 percent range, we believe Conn's could be a $45 stock by the middle of the year.

(At the time of publication, author Tanner Callais was not long shares of CONN).


CONN 1-yr Chart

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Source: Regional Appliance Outfit Conn's Looks Like Takeover Bait (CONN, LOW, HD, WMT, BBY, CC)