NEW YORK (TheStreet) -- Shares of L Brands Inc (LB) were rallying, up 0.42% to $87.83 in early market trading Tuesday, after analysts at Goldman Sachs added the parent company of Victoria's Secret to the firm's "conviction buy" list this morning along with Dollar General (DG).
L Brands was upgraded to "conviction buy" from "buy" with a higher price target of $106 from $104.
Goldman calls L Brands one of the highest quality growth companies in consumer retailing.
The firm said the stock's recent underperformance provides an attractive entry point.
Goldman analysts noted that the company's U.S. business is very strong, and that its exposure in international markets could double total sales and retail over the next 10 years.
Columbus, Ohio-based L Brands is a specialty retailer of women's intimate and other apparel, beauty and personal care products and accessories.
The company sells its merchandise through company-owned specialty retail stores, which are mall-based.
L Brands operates in three reportable segments including Victoria's Secret, Bath & Body Works and Bath & Body Works International. The company also operates the retail brands PINK, La Senza and Henri Bendel.
Separately, TheStreet Ratings team rates L BRANDS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate L BRANDS INC (LB) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, solid stock price performance and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- L BRANDS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, L BRANDS INC increased its bottom line by earning $3.49 versus $3.05 in the prior year. This year, the market expects an improvement in earnings ($3.73 versus $3.49).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 59.5% when compared to the same quarter one year prior, rising from $157.00 million to $250.47 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 5.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 58.49% and other important driving factors, this stock has surged by 58.36% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- 42.04% is the gross profit margin for L BRANDS INC which we consider to be strong. Regardless of LB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LB's net profit margin of 9.97% compares favorably to the industry average.
- You can view the full analysis from the report here: LB Ratings Report