Tuesday Morning defining positive flag

Tuesday Morning Corp. (NASDAQ:TUES) is a closeout retailer of decorative home accessories and gifts, operating from 795 stores in 47 states during periodic "sale events." The company is able to offer brand name merchandise at steep discounts, by selling from low-rent locations and using seasonal help.

Tuesday Morning surprised investors last week, when it said it expected fourth quarter EPS of 53-56 cents and revenues of $321.3 million. Analysts had been looking for 50 cents and $318.85 million. The CEO noted that the firm "ended the year with a significant cash position, zero debt and substantial operating income." Shares popped through 30-day and 50-day moving average resistance on the news and are now consolidating the gain in a bullish "flag" pattern. Equities frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with three "strong buys," ten "holds" and three "sells." The TUES P/E ratio (15.34), PEG ratio (1.10), Price to Sales ratio (0.79), Price to Book ratio (3.35), Price to Cash Flow ratio (11.40), Return on Assets (11.67%), Return on Investment (17.90%) and Return on Equity (23.09%) compare favorably with industry, sector and S&P 500 averages.

The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past twelve months, it has traded between $12 and $23.96. A stop-loss of $15.25 looks good here. Note that the company is expected to report fourth quarter results on February 27th, before the opening bell.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.