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Express, Inc. (EXPR): This Apparel Retailer Could Have a 50% Upside Potential

Guess?, at $31.80 per share, is worth around $2.7 billion on the market. The market placed a bit higher EV multiple at 6.8 on the company. In the first quarter 2013, Guess? experienced the decline in both its revenue and net income. The revenue decreased from $579.3 million last year to $548.9 million this year while the net income dropped from $26.6 million to only $9.9 million. Going forward, the company expected to generate around $2.57 to $2.61 billion in revenue and around $1.70 to $1.90 EPS. CEO Paul Marciano has shown his concern about soft short-term consumer spending and the sluggish Southern European region. Indeed, Europe is the largest loss generator, with more than $5.2 million in operating loss in the recent first quarter.

Urban Outfitters is the most expensively valued. At $42 per share, Urban Outfitters is worth around $6.2 billion on the market. The market values the company at as high as 11.2 times EV/EBITDA. It is the only company among the three that has decent year-over-year growth in net income in the first quarter ended April 2013. While the revenue increased form $569 million in the first quarter last year to $648.2 million this year, its bottom line rose by more than 38% to $47 million. Richard Hayne, the company’s CEO has attributed the recent growth to the company’s focus on direct-to-consumer channel.

What I like about Express, Inc. (NYSE:EXPR) the most is its most profitable operations, with the highest return on invested capital at 24.3%, while the ROIC’s of Guess? and Urban Outfitters are much lower at only 15.55% and 19.61%, respectively.

My Foolish take

With the highest profitability level, a reasonable valuation and the lowest valuation, Express, Inc. (NYSE:EXPR) seems to be a decent retail stock for investors at its current trading price. I personally think that Express could be worth at around 9 times its EV/EBITDA, with a target price of more than $30 per share.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Guess?. The Motley Fool owns shares of Guess?

The article This Apparel Retailer Could Have a 50% Upside Potential originally appeared on

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