Rue21 (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 (AEO) (1.33) and Aeropostale (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:
- The company maintains a solid balance sheet with over $55mm in net cash on the balance sheet (Just under 10% of market capitalization).
- This fast growing retailer almost doubled revenues from FY2009 to FY2012 and still sells for a five-year projected PEG of under 1 (.78).
- 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.
- 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.
- RUE sells of just over 13 times forward earnings, a discount to its historical average as a public company (20.4).
- 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."
- 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.