Quant picks: A trio of ' best buys'

"Aeropostale, helped by consistent double-digit sales growth, has met or exceeded the consensus profit estimate in each of the past eight quarters.

"A specialty retailer focused on apparel and accessories for teenagers, Aeropostale operates more than 900 stores in the U.S., Puerto Rico, and Canada. Aeropostale has grown same-store sales for the past 11 fiscal years, including an 8% gain in the fiscal year ended January.

"Same-store sales have accelerated in the past couple of months, up 20% in April and 19% in May. Total sales rose 30% to $133 million in May. The company opened in June its first "P.S. from Aeropostale" store, a new venture aimed at children aged 7 to 12.

"The kids' apparel market is worth about $14 billion, and Aeropostale hopes to tap the pent-up demand of youths who model their tastes after older siblings.

"Management plans to open another nine P.S. stores by January - and sees potential for up to 500 stores eventually. Aeropostale is a Best Buy.

"As a pharmacy-benefit manager, Catalyst Health Solutions helps lower prescription costs for clients by purchasing drugs in bulk.

"Two other drivers key Catalyst's profitability: generic-drug usage and mail-order penetration. Both rose in 2008 as the poor economy gave clients new incentives to cut expenses.

"Catalyst has delivered highly predictable growth. Revenue has increased by at least 33% in the each of the last nine years. Per-share profits have climbed in 23 of the past 25 quarters, rising an average of 39% in that time.

"In May, Catalyst reaffirmed 2009 profit guidance of at least $1.35 per share, implying growth of at least 16%. Consensus estimates project per-share earnings will grow 21% in 2009 and 18% in 2010.

"Looking further out, U.S. spending on prescriptions is expected to accelerate in the next few years in comparison to other health-care areas. The stock looks attractively priced at 16 times expected year-ahead earnings, a steep discount to the five-year average of 25. Catalyst is a Best Buy.

"Hornbeck Offshore provides oil companies with offshore supply vessels (OSVs) that haul cargo such as diesel fuel and dry bulk cement between coastal bases and offshore rigs.

"These upstream operations represented 78% of revenue and 92% of operating income in 2008. Downstream operations include tugs and barges that transport petroleum products. Last year, Hornbeck hinted that it might sell the tug and barge business.

"The stock has been volatile, retreating 31% since June 1 but still up 29% in 2009. Natural gas prices remain depressed, and many worry about weak demand from gas-oriented operators in the Gulf of Mexico.

"But the stock, trading at less than seven times the lowest Wall Street estimate for 2010 earnings, appears to reflect such concerns.

"Hornbeck has posted a positive earnings surprise in the past three quarters. The company expects per-share profits of $3.50 to $3.97 in 2009, below last year's $4.15. But the consensus estimate hovers at the low end of guidance, giving Hornbeck space to surprise Wall Street again. Hornbeck is a Best Buy."

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