Non-Tech
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SIRN - Sirena Apparel Group: Undervalued But Moving Up
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| An SI Board Since May 1998 |
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SIRN |
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SIRN manufactures and sells women's swimwear, casual wear and intimate apparel under the brand names Hang Ten, Liz Claiborne, Anne Klein, Jezebel and others. It has an IBD EPS rating of 73 with an RS rating of 97 (as of May 1998) and has a float of only 2.7 million shares with total outstanding shares of 4.65 million. Book value is 2.25 per share and it currently is trading at around 7.
Although in a highly cyclical market, SIRN's EPS for the quarter ending March 1998 were 0.80 on revenues of $23.5 million, verses a quarterly EPS of 0.48 on revenues of $18.2 million from the prior year. With a 67% EPS growth rate and a 29% revenue growth rate, SIRN beat the consensus EPS estimate of 0.44 for the last quarter by a whopping 82%. According to the company's press release on its record earnings (see biz.yahoo.com ), it looks like SIRN will enjoy continued high earnings. As a result, SIRN easily should blow away the projected earnings of 0.16 for the fiscal year ending in June 1998, and the 0.47 earnings estimate for the next fiscal year.
Simply adding the +0.36 earnings surprise from the recent quarter to the FY 1998 estimate of 0.16 and the FY 1999 estimate of 0.47 (without any other upward adjustments) gives a PE ratio of only 13.5 for this year and a leading PE of only 8.4. Using a more realistic PE of 25 sets a target price for this fiscal year (ending June 1998) of 13, and a target price of 20.75 during the next fiscal year (starting June 1998). Continued upside earnings surprises will push these targets even higher.
SIRN has been trading over the last three weeks in a base of between 6 and 7 (even after the recent earnings report) on exceptionally heavy volume after having risen from 4 over the prior three week period. It has been under heavy accumulation, and looks like it is about to break out into another strong upward move. Nonetheless, the stock has not yet been discovered by the broader investment community and presents a great opportunity to get in before the likely coming flood.
Finally, one reason to expect continued upside earnings surprises is SIRN's recent adoption of new technology by APTX that allows consistent color matching for digital production runs utilizing an electrostatic printing device. (See biz.yahoo.com .) With this new technology, SIRN will be able to make "just-in-time" retail stocking a realistic option in apparel merchandising, potentially eliminating millions of dollars in inventory costs and write downs.
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