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Top Retail-Industry Bet: Denim Stocks

Stocks in this article: JOEZTRLGBKE

BOSTON ( TheStreet) -- February retail sales rose 0.9%, excluding cars and gas, the fourth gain in five months. A niche that's outperforming is denim, once the working man's material that now fetches up to $200 in young people's jeans. Here are three stocks to consider.

3. Joe's Jeans (JOEZ) sells high-end women's denim through third parties, its Web site and company-owned boutiques and outlet stores. Pairs typically fetch between $100 and $200. Black Friday same-store sales surged 169% in 2009.

Quarter: Fourth-quarter profit multiplied 18 times to $20 million, or 33 cents a share, as revenue grew 42% to $25 million. The operating margin widened from 7% to 12%. Joe's balance sheet holds $13 million of cash and $3.1 million of debt.

Stock: Joe's Jeans has soared 830% in the past year, outperforming U.S. indices. The stock trades at a price-to-projected-earnings ratio of 25, a 29% premium to its peer-group average. The shares are cheap based on book value and sales.

Consensus: Just one sell-side firm, Roth Capital Partners, covers Joe's Jeans, rating its stock "buy." The shares have already surpassed the firm's $2.25 price target, implying limited upside. Still, the stock jumped 16% in the past four weeks.

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