Conn's Inc. - Value

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The Texas economy is still hot. Conn's Inc. ( CONN ), a specialty retailer with most of its stores in the Lone Star state, is expected to post triple digit earnings growth in fiscal 2012. This Zacks #1 Rank (Strong Buy) is a growth stock that also has value. It trades with a price-to-sales ratio of just 0.7.

Conn's operates 65 stores in Texas, Louisiana and Oklahoma selling home appliances, consumer electronics, lawn and garden products and furniture and mattresses.

Most of its stores are in Texas with 22 stores in the Houston area, 15 in the Dallas/Fort Worth metro area, 7 in San Antonio, and 3 in Austin. It also operates 6 in Louisiana and 2 in Oklahoma.

The company also operates its own finance arm, and finances about 60% of its retail sales.

Same Store Sales Jump 12.1% for the Quarter Ending Jan 31, 2012

On Feb 7, the company released preliminary fiscal fourth quarter sales results.

Net sales rose 4.2% to $189.5 million compared to the year ago quarter. Same store sales rose 12.1% versus a year ago.

The same store sales data included those operating for the entirety of both periods, excluding 8 stores that were closed, 1 store in the process of being closed and 2 stores with leases that expired during fiscal year 2012.

Sales were boosted by increases in average selling prices across all major categories and expanded product selection in Furniture and Mattresses which saw sales rise 20.2%.

Consumer electronics, however, saw same store sales decline 9.8% primarily due to a 30.6% decrease in unit sales of televisions. Conn's didn't compete for the low-margin, low-priced sales. Specifically, it didn't have Black Friday promotions.

Zacks Consensus Estimates Rise for Fiscal 2012

The fiscal 2012 Zacks Consensus Estimate rose 2 cents to 61 cents in the last 60 days.

That is earnings growth of 236% as the company made just 18 cents in fiscal 2011.

But analysts expect the growth to continue in the new year. Earnings are expected to grow another 77.3% to $1.07 per share.

Shares at New Highs

Conn's shares have rallied along with the rest of the stock market and are at 3 year highs.

Yet there's still value in the shares despite the new highs.

In addition to a P/S ratio under 1.0, which usually means a company is undervalued, Conn's has a forward P/E of 14.8. I use 15x as a cut-off for value stocks so Conn's sneaks in just under the wire.

But it also has a cheap price-to-book ratio of 1.5. A P/B under 3.0 usually means there is value.

Conn's is scheduled to report official quarterly results on Apr 3 so we'll get an idea then just how strong (or not) the Texas economy is. Stay tuned.

Tracey Ryniec is the Value Stock Strategist for Zacks.com . She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec .


 
CONNS INC ( CONN ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

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