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As the Holidays come to an end it is time for consumers to take their gift cards and size XS small clothes back to apparel retailers. The apparel stores industry has experienced YTD returns of 29.53% and could inch even higher with strong holiday season numbers.
We screened for stocks that are outperforming the apparel industry averages on metrics that don’t just show good short term earnings management, but represent signs of sustainable value creation for shareholders. The metrics we looked at are listed below with the industry average in parenthesis:
ROE: Measures firm’s performance in using equity to generate earnings for shareholders (19.4%).
Net Profit Margin: It measures how much out of every dollar of sales a company actually keeps in earnings (5.60%).
Sales Growth over past 5 Years: We want to make sure our returns are being supported by top line growth, not just cost cutting.
P/E: Looking for stocks under industry average in order to assess if they are “cheaper” than their peers (16.2)
Business Section: Investing Ideas
Screening using the above metrics produced a list of apparel store industry companies that not only have strong fundamentals, but are also on the cheap relative to the industry average:
1. Buckle Inc (
BKE): Operates as a retailer of casual apparel, footwear, and accessories for young men and women in the continental United States. Market cap at $2.11B. ROE: 41.75% NPM: 14.45% Sales Growth 5 yrs: 14.94% P/E: 13.18
2. Nordstrom Inc (
JWN): A fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. Market cap at $10.43B. ROE: 36.35% NPM: 5.87% Sales Growth 5 yrs: 4.65% P/E: 15.98
3. Ross Stores Inc (
ROST): Operates off-price retail apparel and home accessories stores under the Ross Dress for Less and dd’s DISCOUNTS brand names in the United States. Market cap at $11.84B. ROE: 47.19% NPM: 7.93% Sales Growth 5 yrs: 9.10% P/E: 16.94