1. Summer Infant ( SUMR) designs, markets and distributes kids' health, safety and wellness products throughout North America and the U.K.

Quarter: 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.

Stock: 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%.

Consensus: 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, Canaccord Genuity 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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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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