A Retailer Above the Fray: Under the Radar

"Under the Radar" uncovers little-known companies worthy of investors' consideration. Check in at 5 every Monday, Wednesday and Friday morning to find out about stocks that tend to beat their bigger brethren.

BOSTON (TheStreet) -- Specialty retail is a tricky industry. Companies with long-term "buy" ratings are few and far between because fashion trends are ephemeral.

I've been an advocate of denim-retailer The Buckle (BKE) for about a year. The company has achieved superlative growth, boosting quarterly same-store sales for 10 consecutive periods despite the economic recession. A 12-month growth rate of 21% for sales and 25% for earnings spells counter recessionary. Few, if any, can match that record.

Alas, consistent operating success doesn't translate into predictable stock performance. The shares have been whipsawed this year, surging 90% between my last positive article on Jan. 15 and May 4. The May 4 top was at $38.47. Today, you can pick up shares for $27 and change, 30% below the May peak and 40% less than the 52-week high. At a trailing price-to-earnings ratio of 11, the stock is 47% cheaper than its peer group.

If you sold in May and went away, our January "buy" recommendation was extremely lucrative. If not, you're still up 35% from cost, outpacing the Dow Jones Industrial Average and S&P 500 Index over the same period. Investors sifting through specialty retailers who are tired of hearing about "hold"-rated Abercrombie (ANF) and American Eagle (AEO) should investigate The Buckle, a Street.com Ratings favorite.

Second-quarter net income rose 12% to $25 million, or 54 cents a share, as revenue grew 14% to $193 million. Its gross margin declined from 45% to 43%, but its operating margin widened from 18% to 20%. The balance sheet is prodigious, with $163 million of cash, equating to a quick ratio of 2.1, and zero debt. We give The Buckle a financial strength score of 8.9 out of 10, higher than the "buy"-list average of 7.1.

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