BOSTON (TheStreet) -- Luxury retailers and discounters are getting plenty of Black Friday play, but little attention has been paid to the makers of apparel and consumer goods. Here are three small-cap stocks with the highest ratings and at least 27% of potential upside. They trade at discounts to peers despite above-average 12-month growth.
makes apparel essentials. (Read: underwear.) It owns the Hanes, Champion, Playtex, Bali and L'eggs brands.
: Third-quarter profit surged 49% to $61 million, or 63 cents a share, as sales advanced 10% to $1.2 billion. Hanes beat analysts' consensus earnings target by 1.9% and their sales target by 1.7%. Its gross margin narrowed from 35% to 33% and its operating margin contracted from 10% to 9.7%. Hanes held $76 million of cash and $2.1 billion of debt at the end of the quarter, converting to a quick ratio of 0.6 and a debt-to-equity ratio of 3.8. Hanes has grown sales 7.9% annually, on average, since 2007. An acquisition of
Gear for Sports
is currently pending.
: Hanes shares trade at a trailing earnings multiple of 15, a forward earnings multiple of 9.9 and a sales multiple of 0.6, 40%, 49% and 71% discounts to textiles, apparel and luxury goods industry averages. The stock's book value multiple of 4.8 and cash flow multiple of 16 are on par with peer means. Still, a PEG ratio, a measure of value relative to growth, of 0.1 signals a 90% discount to estimated long-term fair value. Hanes has advanced 15% year-to-date, more than double the rise of the
S&P 500 Index
. It has fallen from a 52-week high, recorded in April.
: Of analysts following Hanes, seven advise purchasing its shares and two recommend holding them. A median price target of $35.14 suggests a looming 12-month return of 27%. Bullish forecaster
predicts that the stock will advance 36% to $38.
forecasts a gain of 33% to $37. On the other hand,
Sterne, Agee & Leach
expect Hanes shares to rise 11% to $31. Restructuring charges decreased in the latest quarter and Hanes recently refinanced $1 billion of debt, extending its maturity to 2020.
No one likes finding underwear and socks in their stocking. Some gifts are necessary, though boring, staples. Hanes is a compelling value investment with holiday-season momentum.
designs outerwear and sportswear, including coats, jackets and suits. It sells its products to retailers such as
: G-III swung to a fiscal second-quarter profit of $3 million, or 15 cents a share, from a year-earlier loss of $2.8 million, or 17 cents a share. Revenue grew 39% to $189 million. The gross margin extended from 30% to 32% and the operating margin climbed from negative territory to 3%. G-III held $6.1 million of cash at the end of the quarter and $77 million of debt, equaling a quick ratio of 0.6 and a debt-to-equity ratio of 0.3. G-III has boosted revenue 25% annually, on average, since 2007 and expanded earnings per share 29% a year over that span.
: G-III shares sell for a trailing earnings multiple of 11, a forward earnings multiple of 8.9, a book value multiple of 2.2 and a sales multiple of 0.6, 54%, 53%, 56% and 74% discounts to textiles and apparel industry averages. However, its cash flow multiple of 31 represented a 97% premium to its peer average. Still, G-III's PEG ratio of 0.2 signals an 80% discount to estimated long-term fair value. G-III has returned 29% year-to-date, outperforming U.S. stock indices. It has delivered annualized gains of 30% since 2007.
: Of researchers evaluating G-III, six, or 75%, advocate purchasing its shares and two recommend holding. None advise selling. A median price target of $39.17 implies an impending one-year gain of 40%.
predicts that G-III's stock will appreciate 43% to $40. The lowest price targets come from
Lazard Capital Markets
, which both expect G-III shares to rise 29% to $36. G-III, which has been a licensee of the NFL since 1988, just signed an exclusive agreement expanding its relationship with the league.
G-III, though not a closely followed company, with a market value of just $526 million, also has license agreements with Calvin Klein, the NHL, the NBA and Major League Baseball.
designs, markets and distributes kids' health, safety and wellness products throughout North America and the U.K.
: Third-quarter net income increased 15% to $2.1 million and earnings per share rose 8.3% to 13 cents. Revenue increased 22% to $50 million. The gross margin remained steady at 36% and the operating margin declined from 7.9% to 6.4%. Summer Infant held $1.3 million of cash and $49 million of debt at the end of the quarter, translating to a reasonable debt-to-equity ratio of 0.6. During the past three years, Summer Infant has boosted revenue 60% annually, on average, and increased earnings per share 41% a year, on average.
: Summer Infant shares trade at a trailing earnings multiple of 15, a forward earnings multiple of 11, a book value multiple of 1.5 and a sales multiple of 0.6, 18%, 29%, 63% and 57% discounts to industry averages. A PEG ratio of 0.5 reflects a 50% discount to estimated long-term fair value. Summer Infant has advanced 60% year-to-date and has delivered annualized gains of 11% since 2007. Summer Infant has fallen 19% from a 52-week high recorded in August. It missed analysts' consensus third-quarter earnings target by 9% and sales target by 1.1%.
: Of analysts following Summer Infant, seven, or 88%, advocate purchasing its shares and one recommends holding them. None are advising clients to sell. A median price target of $10.50 suggests a looming 12-month return of 46%. Small-cap focused
Needham & Co.
offers a target of $12, implying a gain of 67%. On the low end of the spectrum,
forecasts that Summer Infant's stock will rise 25% to $9. The company is pushing into new markets. It recently launched its Prodigy Infant Car Seat and Travel System.
Management has recently warned of margin contraction amid higher commodity costs. Still, increased shelf space and new product launches should sustain growth.
-- Written by Jake Lynch in Boston.
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