Fast Growing Retailer Is Now On Sale On Aisle 21

| About: Rue21 Inc (RUE)

Rue21 (NASDAQ:RUE) recently popped up on my radar screen as I continue to look for growth at a reasonable price stories. This fast growing teen retailer is selling at a lower valuation based on five-year projected PEG (.78) than both American Eagle Outfitters (NYSE:AEO) (1.33) and Aeropostale (NYSE:ARO) (1.23). Growth investors should seriously consider the stock if they are looking to increase their retailing exposure.

"rue21, inc. operates as a specialty apparel retailer in the United States. It provides fashion apparel and accessories for girls and guys, including graphic T-shirts, denim, dresses, shirts, hoodies, belts, jewelry, handbags, footwear, intimate apparel, and other accessories." (Business description from Yahoo Finance).

Seven reasons RUE is a solid growth pick up at $28 a share:

  1. The company maintains a solid balance sheet with over $55mm in net cash on the balance sheet (Just under 10% of market capitalization).
  2. This fast growing retailer almost doubled revenues from FY2009 to FY2012 and still sells for a five-year projected PEG of under 1 (.78).
  3. Rue21 has consistently beat earnings estimates since it became a public company. The company has posted a "beat" in 10 of its 11 quarters. The average beat over the last four quarters has averaged just under 7% a quarter.
  4. The stock sells at approximately 8 times operating cash flow and the company used that cash flow to purchase 2% of its float in the recent completed quarter.
  5. RUE sells of just over 13 times forward earnings, a discount to its historical average as a public company (20.4).
  6. Janney Montgomery Scott recently reiterated its buy rating on the stock and Jefferies just upped its price target on RUE to $40 from $32 a share. It also upgraded the stock to a "buy" from a "hold."
  7. Earnings are moving up at a nice clip. The company made $1.55 a share in FY2012, and analysts see it earning $1.84 a share in FY2013 and $2.11 in FY2014.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in RUE over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.