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Children's Place Stock Is a Back-to-School Bargain

Conditions have become very favorable for one specialty retailer, Real Money's Paul Price says.

Retail has had a brutal year. In fact, retail has endured a brutal decade.

So what? Real Money's Paul Price has five very specific reasons why you should consider the specialty retailer Children’s Place  (PLCE) - Get Children's Place, Inc. Report, shares of which are up almost 65% year-to-date: 

Parents skimped on kids' clothing last year as most students did not physically go 'back to school' due to Covid-19-related reasons. This year those children are a year older, a lot larger and their clothes are in need of major upgrades.

Get the most from Price's investing ideas and trading strategies on Real Money.

President Biden's aid to families with children began distributing substantial electronic payments this month. That program is scheduled to go on for quite a while with the ultimate political goal to make the payments permanent.

Children's Place has vastly improved its online presence and fully integrated its purchase of industry rival Gymboree.

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Many unprofitable stores were closed during the Covid-19 shutdowns. Charges for those closures were already accounted for but the improved margins on the remaining units are just starting to fully kick in.

It is likely that management will reinstitute cash dividends before long, providing a larger universe of potential institutional holders.

What is Children’s Place worth? It’s a great question. Market analysts have been calling this stock wrong for the better part of a year. Since last October, the company’s earnings per share have clocked in many times more than the market predicted. In fact, in April the earnings per share of Children’s Place were 5,316.70% higher than forecast. (Not a typo nor a joke.)

Analysts have been way too slow in realizing just how favorable conditions for PLCE have become. Their estimates over the past three quarters were pathetically off by percentages that seem to be typos, but weren't. Read the full column from Price on Real Money. 

Over those nine months of actually reported results, PLCE posted $5.70 in EPS. The end of July quarter last summer marked the very bottom of PLCE's Covid-19 woes. They lost $1.48 in adjusted earnings during that interval last year, per Yahoo Finance. Even a modest profit this year will make trailing 12-months EPS at least around $7.50.

And that doesn’t even account for back-to-school shopping.