Ascena Retail Group, Inc. (ASNA) continues to put out positive news. First it raised its annual guidance, and then posted fantastic sales figures.
The company is set to report in early March, but now looks like a great time to get into this Zacks #1 Rank (Strong Buy).
Company Description
Ascena, known as Dress Barn Inc. up until last month, is a specialty apparel retailer for women and girls under the brands dressbarn, maurices and Justice.
Getting Better and Better
On Feb 3 Ascena announced a 9% jump in same-store sales for the second quarter of fiscal 2011. Overall, sales surged 27%, to $752 million during the period, lead by the Justice brand. Sales for the first half of the year are now up 47%, to nearly $1.5 billion.
Ascena saw this trend early and decided to raise its full-year guidance on Jan 10 after a particularly strong holiday shopping season. The company now expects earnings to land between $2.20 and $2.25, raising the bottom end $0.15 and the top end $0.10.
Estimates Jump
Both the sales report and the revised guidance led analysts to raise estimates. After 8 upward revisions in the past month, the Zacks Consensus Estimate for this year is up $0.11 cents, to $2.23. Next year’s forecasts are also up $0.11 cents on average, to $2.48.
In fiscal 2010 Ascena earned $1.81 per share, making expected growth rates 23% and 11%, respectively.
Valuations & Comparisons
Shares of ASNA are showing more than just solid growth rates, they are trading with great valuations as well. The forward P/E is just 13 times and the PEG is at 1.0.
Ascena operates with a net profit margin of 6.0%, trumping its industry average of 3.8%. The average ROE for the industry is 13.4%, but Ascena is about 300 bps ahead of that level.
The Chart
After share jump, many are reluctant to buy into a stock. But keep in mind the valuations are still attractive and now momentum is going ASNA’s way, making this a great buying opportunity.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
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