BKE

After reading a few articles highlighting attractive retail/apparel stocks, we have decided to analyze the companies mentioned in these two articles based on their attractiveness from a valuation standpoint using AFG’s valuation model.  We have examined the expectations for sales growth embedded in their current prices using AFG’s Value Expectation interface, as well as provided four companies that we find attractive in this retail/apparel space. The first four companies listed in the table are from an article in MSN Money by Catherine Holahan that mentions companies thriving in the recession (performed well in March), The second four are from an article from The Curious Investor (SeekingAlpha.com) that give the author's picks for companies ready to take advantage of a retail revival when consumer spending returns to a more normal level. The final four stocks are companies that we find the most attractive in the retail/apparel space.

When analyzing the sales expectations for these companies, measuring the spread between a company’s VE sales growth expectations and what it has historically delivered will give you a good idea of which companies have the best chance of meeting or exceeding those expectations, and thus are more likely to outperform.

 Retail/Apparel Companies

*AFG’s Value Expectation allows us to understand the imbedded Sales Growth, EBITDA Margins, and Asset Turnovers a company has to deliver in the future to justify its current trading price. In theory and in normal circumstances, if the imbedded future performance is very conservative relative to the company’s historical performance, the stock is regarded as undervalued. The table displays the implied future sales growth of companies assuming their EBITDA margins and Asset turnovers stay at the 5 year median levels.

For the past 26 years Steven Halpern, editor of thestockadvisors.com has gone to well known and respected advisors once a year to find out which stocks they like for the coming year. Take a look at the list of stocks advisors liked in 2008 and their performance. Also listed are the picks of 75 prominent advisors for 2009 along with sales growth expectations for the companies to justify their current price (VE Sales Growth) which can be compared to what they have delivered in revenue growth over the past 5 years(5 Year Median Sales Growth). These companies are worth a look because they are in favor of well-respected advisors, but the companies that also have low expectations for sales growth priced-in to their stock are especially worthy of a close review.

2008 Blogger Picks Conservative and 2008 Performance

2008 Blogger Picks Speculative and 2008 Performance

Blogger Picks for 2009 and Sales Expectations

* denotes # of years historical sales numbers available

VE Sales Growth calculated for these firms on 1-6-09