AOL Money & Finance

Market 'legends' like Aeropostale (ARO)

More

Validea is an intriguing newsletter that selects stocks based on the strategies of the market's most legendary investors. Here, editor John Reese takes a look at Aeropostale (NYSE: ARO).

"This mall-based clothing retailer targets youngsters age 14 to age 17 through more than 900 stores in 49 states, Puerto Rico, and Canada.

"The company has developed a new retail store concept called P.S. from Aeropostale, which will offer casual clothing and accessories focusing on elementary school children between the ages of seven and 12.

"In the past year, the $2.6 billion market cap firm has raked in more than $2 billion in sales. Aeropostale has an impeccable earnings history, upping earnings per share in every year of the past decade. It's at it again this year, with EPS and sales rising in each quarter so far in 2009.

"Aeropostale gets approval from three of my Guru Strategies, those I base on the approaches of Peter Lynch, Warren Buffett, and James O'Shaughnessy. The stock also gets approval from the price/sales strategy of Kenneth Fisher.

"In Fisher's strategy, The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratio between .75 and 1.5 are good values.

"ARO's P/S ratio of 1.37 based on trailing 12 month sales, falls within the "good values" range for non-cyclical companies and is considered attractive.

"Under this methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. ARO's inflation adjusted EPS growth rate of 24.81% passes the test.

"Fisher looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses.

"This is based on the premise that companies without cash will soon be out of business. ARO's free cash per share of 1.68 passes this criterion.

"In addition, his strategy looks for companies that have an average net profit margin of 5% or greater over a three year period. ARO, whose three year net profit margin averages 7.86%, passes this evaluation."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

Add your comments

Please keep your comments relevant to this blog entry. Email addresses are never displayed, but they are required to confirm your comments.

When you enter your name and email address, you'll be sent a link to confirm your comment, and a password. To leave another comment, just use that password.

To create a live link, simply type the URL (including http://) or email address and we will make it a live link for you. You can put up to 3 URLs in your comments. Line breaks and paragraphs are automatically converted — no need to use <p> or <br /> tags.

Symbol Lookup
IndexesChangePrice
DJIA+132.7910,450.95
NASDAQ+29.972,176.01
S&P 500+14.861,106.24

Last updated: November 24, 2009: 02:33 AM

BloggingStocks Exclusives

Hot Stocks

DailyFinance Headlines

Latest from BloggingBuyouts

TheFlyOnTheWall.com Headlines

    BioHealth Investor Headlines

    WalletPop Headlines

    My Portfolios

    Track your stocks here!

    Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

    BloggingStocks Partners

    More from AOL Money & Finance

    WalletPop Headlines