Through The Fly's Eyes: Stage Stores

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













Stage Stores: Retail Chain Apparel For Small Town America

From Tommy Hilfiger and Elizabeth Arden to Levi's and Jockey, there is a Houston, Texas firm that specializes in bringing brand name apparel to small towns and communities throughout the U.S.

Stage Stores (NYSE:SSI) is a specialty department store retailer, offering moderately priced brand name and private label apparel, accessories, cosmetics, and footwear in small town and mid-sized markets. Altogether, the chain has 655 stores in 33 states. It operates under the Bealls, Palais Royal and Stage names, throughout the South Central part of the country. In Midwestern, Southeastern, Mid-Atlantic and New England states, the stores fly the Peebles banner.

The firm surprised the Street earlier in the month, when it announced Q4 EPS of 88 cents and revenues of $491.2 million. Analysts had been looking for 87 cents and $488.1 million. Management also guided Q1 EPS to 31-35 cents (26 cent consensus), Q1 revenues to $372-$380 million ($373.97M consensus), FY08 EPS to $1.45-$1.55 ($1.53 consensus) and FY08 revenues to $1.61-$1.66 billion ($1.64B consensus). The stock broke through 90-day, 50-day and 30-day moving average resistance on the news and has since been defining a bullish "flag" consolidation pattern. Stocks 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 two "strong buys" and three "buys." The SSI P/E ratio (19.03), PEG ratio (1.27), Price to Sales ratio (0.67), Price to Book ratio (1.80), Price to Cash Flow ratio (10.23), Sales Growth rate (17.34%) and EPS Growth rate (95.56%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $16.67 and $23.99. A stop-loss of $20.35 looks good here.