Just like in an apparel store, one needs to dig deep to find value in the stock market. The greatest stocks are, on many occasions, not so easily visible. Below, you will find three companies that are undervalued in relation to their peers and potential.
Offering compelling growth prospects for the years to come, Iconix Brand Group Inc (NASDAQ:ICON), Vera Bradley, Inc. (NASDAQ:VRA), and Perry Ellis International, Inc. (NASDAQ:PERY) deserve a closer look. Be quick, before the market catches up to their fair values.
Iconix Brand Group Inc (NASDAQ:ICON) licenses, markets, and provides trend direction for several consumer — apparel and accessories — brands around the world. Numerous joint ventures, including Iconix China, Iconix Latin America, Iconix Europe, OP Japan, and Iconix India provide extra revenue sources and are expected to contribute with larger shares over the upcoming years. Moreover, the firm continuously seeks to widen its portfolio through brand acquisitions and partnerships, having purchased about 1,000 licenses over the last decade.
Over the past three years, revenue has grown 15% and net income by over 13%. Comfortably surpassing industry average figures, Iconix Brand Group Inc (NASDAQ:ICON) has proven resilient to tough economic patches. Somewhat “moated,” the firm managed to deliver strong performances in the U.S. and Europe, even through the last crisis.
Emerging markets also provide plenty of opportunities for further growth. The company´s strategic joint ventures and partnerships are expected to drive earnings in overseas markets, especially in China (where early results look particularly promising), India, and Latin America, along with other major markets like Canada, Israel, and Australia. Management expects international sales to account for 33% of total revenue this year, up from 24% in 2012.
Furthermore, Iconix Brand Group Inc (NASDAQ:ICON)’s agreements with several retail giants, including Wal-Mart Stores, Inc. (NYSE:WMT), Target Corporation (NYSE:TGT), Kohl’s Corporation (NYSE:KSS), and Macy’s, Inc. (NYSE:M), promise to contribute significantly to earnings in the years ahead, especially given the long-term and exclusive nature of the contracts.
On its way to becoming a leader in brand management, I’d recommend buying this stock before its valuation ceases to be attractive. Currently trading at 14 times consensus earnings, less than half the industry average, while offering an expected annual EPS growth rate of about 18%, the stock looks undervalued, thus offering a good entry point for investors.
Multi-channel means more income
Vera Bradley, Inc. (NASDAQ:VRA) is a designer, producer, marketer, and retailer of trendy women’s apparel and accessories. A few days ago, the firm’s CEO, Michael C. Ray, announced his retirement and its stock plummeted. Although slowly recouping, its shares still trade very close to an all-time low.
Valued at only 13.5 times its earnings, this is definitely a good time to buy some Vera Bradley, Inc. (NASDAQ:VRA) shares. Although undervalued in relation to its peers, the firm is still expected to comfortably outperform its competitors over the next five years, delivering an average annual EPS growth rate in the 14%-17% range.
My investment thesis here is based on the idea that the market overreacted to the news of Vera Bradley, Inc. (NASDAQ:VRA)’s CEO leaving, thus opening a great entry point for investors. Beyond this fact, the company offers compelling growth prospects for the upcoming years. For starters, its multi-channel retail model reduces its dependence on one source of revenue, diversifying its risks. Moreover, this strategy provides the firm with great exposure to several markets, constantly strengthening its brand name.