Stock Buy: Guess Inc.

Zacks Investment Research
updated | Zacks.com

Guess Inc. (NYSE:GES) is expected to generate long-term EPS growth of 17.5%, while offering a dividend yield of 1.2%.

Company Description

Guess Inc. designs, markets, distributes and licenses contemporary apparel, denim, handbags, watches, footwear and other related consumer products.

The company operates 433 retail stores in the U.S. and Canada and 753 retail stores outside of North America, of which 115 were directly owned.

Healthy Financials

Guess trounces the industry averages in a few important financial metrics. Notably, Guess has a trailing twelve month net profit margin of 10.0%, well above the industry average of 3.2%. Guess’ return on equity was 25.4%, doubling the industry average of 12.7%.

Recent Results

Guess announced third-quarter earnings of 69 cents per share, eclipsing the Zacks Consensus Estimate by 38%. Net revenue of $522.8 million feel 1% from the year-earlier period.

The company indicated that each of its business segments beat expectations on both the top and bottom lines, as customer continued to respond well to product assortment in all markets around the world. Guess remains focused on controlling costs and managing inventories protect margins.

The company is scheduled to report fourth-quarter results on March 17.

Steady Estimates

Guess last reported at the end of the November, so it isn’t too surprising that analyst estimates are holding steady.

We note, however, that Guess has beaten analyst estimates by an average of 28.5% for the last five quarters. So, there is a good chance for the company to deliver another strong quarter in the next week or so.

As it stands, the Zacks Consensus Estimate for fiscal 2010 is $2.50, and the fiscal 2011 Zacks Consensus Estimate is $2.90.

Reasonable Valuation

Based on those EPS estimates, GES shares are trading at 14.8x 2011 consensus estimates. Seems like a pretty reasonable valuation, given that analysts expect the company to achieve annual EPS growth of 17.5% for the next five years.

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