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5 Specialty-Retail Stocks That Could Pop

BOSTON ( TheStreet) -- The still-challenged U.S. consumer is showing signs of life. So-called personal-consumer expenditures were a catalyst for fourth-quarter gross domestic product, which grew at a 2.8% pace, improving on the third quarter's 2.6%. Specialty retailers should enjoy 2011 sales growth as more enter the workforce. Here is a look at five top small-cap specialty retail stocks. Below, they are ordered by percentage of "buy" ratings.

5. Destination Maternity (DEST - Get Report) sells maternity apparel, ranging from casual to career wear.

Destination Maternity's stock has gained 32% a year, on average, since 2008, besting retail peer investments. It has soared 90% in the past 12 months. The company is growing a following on Wall Street. Currently, three researchers rank its stock "buy" and one ranks it "hold." None rate the shares "sell." Small-cap focused Needham & Co. forecasts that Destination's stock will rise another 20% to $54 in the next 12 months. Sterne, Agee & Leach more conservatively predicts a rise of 14% to $51. Despite a recent run, the shares are still cheap.

Destination's stock trades at a trailing earnings multiple of 14, a forward earnings multiple of 10, a sales multiple of 0.5 and a cash flow multiple of 7.6, 25%, 37%, 45% and 38% discounts to specialty retail peer averages. Its PEG ratio, calculated by dividing the trailing P/E by analysts' terminal growth forecast, of 0.3 indicates a 70% discount to estimated fair value. Fiscal first-quarter adjusted earnings increased 24% to 88 cents, beating analysts' consensus estimate by 29%, as the operating margin rose from 5.3% to 6.8%. Sales narrowly missed the consensus forecast.

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