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) 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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