There is a firm in San Francisco that got started offering developmental play environments for children. From there, of course, it was just a hop, skip and jump to success in the children's apparel game.

Gymboree Corporation (NASDAQ: GYMB) is a specialty retailer of apparel and accessories for children. The company operates a total of 735 establishments: 585 Gymboree retail stores (555 in the United States and 30 in Canada), 68 Gymboree Outlets and 82 Janie and Jack retail shops in the United States. It also operates online shops and offers directed parent-child developmental play programs at 544 franchised and company-operated centers in the U.S. and 31 other countries. Competitors include Gap Inc. (NYSE: GPS) and Target Corporation (NYSE: TGT).

The firm pleased investors last week, when it announced a new $50 million stock buyback program. Management also said that it expects second quarter earnings per share of 13 to 15 cents. Analysts had been looking for 12 cents. The CEO attributed the improved outlook to the benefits of strategic merchandising, sourcing, marketing and expense control initiatives. Susquehanna Financial and Friedman Billings subsequently upgraded the issue to "buy." The share price popped on the news and has since been consolidating the gain in a bullish "flag" pattern. Prices 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 GYMB with one "strong buy," four "buys" and four "holds." The stock's PEG ratio (1.28), Price to Sales ratio (1.57), Price to Cash Flow ratio (11.70), Price to Free Cash Flow ratio (22.96), EPS Growth rate (26.42%), Return on Assets (17.86%), Return on Investment (23.96%) and Return on Equity (29.02%) 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. Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, GYMB has traded between $29.06 and $49.11. A stop-loss of $35.40 looks good here. Note that the firm is expected to present Q2 results in mid-August.

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

Gymboree (GYMB): It's about the kids originally appeared on BloggingStocks on Mon, 06 Aug 2007 15:00:00 EST. Please see our terms for use of feeds.