If you have a son or daughter you have probably shopped at Aeropostale (NYSE: ARO), the mall based retail store that markets and sales casual apparel and accessories to the 14 to 17 year old teenager. Aeropostale operates more than 900 stores in 49 states and Puerto Rico. They also operate roughly 50 stores in Canada.
Strengths
Aeropostale has a strong and easily recognized brand in the teenage apparel sector.
Aeropostale has a strong management team that have achieved Return on Assets and Returns of Equity of over 30.92 % and 51.65 % respectively.
Aeropostale's management have bought back over $300 million stock since it initiated share repurchases in November 2010. This buy back represent 13.7% of Market Cap.
Weakness
Competitors such as Abercrombie and Fitch (NYSE: ANF) and American Eage (NYSE:AEO) keep the pressure on Aeropostale to provide the latest in fashion to notoriously hot and cold teenage consumer.
The higher input cost could mean problems for profit margins in the future.
Metrics
Aeropostale has a trailing P/E ratio of 10.13 and a forward P/E of 10.25. They also have a Price to Sales ratio of .99, not in the Kenneth Fisher "superstock" range for P/S ratio but still good. The company has $240 million of cash and cash equivalents on hand and no debt.
Valuation
With a conservative 10% growth rate using DCF valuation I have a fair value of 39.37 and If you use the historical growth rate of about 20% there is a fair value 63.37. These values represent margins of safety of roughly 34% and 59% respectively. And for all the Ben Graham fans, using his classic EPS x (8.5+2g) formula you yield a fair value of $57.83 with an ultra conservative 7% growth rate.
Strengths
Aeropostale has a strong and easily recognized brand in the teenage apparel sector.
Aeropostale has a strong management team that have achieved Return on Assets and Returns of Equity of over 30.92 % and 51.65 % respectively.
Aeropostale's management have bought back over $300 million stock since it initiated share repurchases in November 2010. This buy back represent 13.7% of Market Cap.
Weakness
Competitors such as Abercrombie and Fitch (NYSE: ANF) and American Eage (NYSE:AEO) keep the pressure on Aeropostale to provide the latest in fashion to notoriously hot and cold teenage consumer.
The higher input cost could mean problems for profit margins in the future.
Metrics
Aeropostale has a trailing P/E ratio of 10.13 and a forward P/E of 10.25. They also have a Price to Sales ratio of .99, not in the Kenneth Fisher "superstock" range for P/S ratio but still good. The company has $240 million of cash and cash equivalents on hand and no debt.
Valuation
With a conservative 10% growth rate using DCF valuation I have a fair value of 39.37 and If you use the historical growth rate of about 20% there is a fair value 63.37. These values represent margins of safety of roughly 34% and 59% respectively. And for all the Ben Graham fans, using his classic EPS x (8.5+2g) formula you yield a fair value of $57.83 with an ultra conservative 7% growth rate.
