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WHY BROOKSTONE IS SUCH A BARGAIN
Practically every retailer has gone online to take advantage of heavy E-commerce on the Net. Brookstone (BKST) is no exception. But the potential of its Web-site business has yet to be recognized and tapped, says one New York money manager who has been loading up on stock--but for one other reason: He thinks Brookstone is an alluring takeover target. A specialty retailer of personal-care items, lawn and garden tools, and recreational products, Brookstone sells through catalogs and at 194 stores in 36 states, at regional malls, airports, and resorts.
This pro figures that on earnings growth alone, the stock is worth twice its current price of 11. Indeed, the stock is trading at less than twice its book value of more than $7 a share, compared with an average of six times book value for companies in the Standard & Poor's 500-stock index. And Brookstone's price-earnings ratio is 9 to 10--quite low, analysts say, given the company's earnings growth rate of more than 20% in each of the past three years. And then there is the huge potential, they say, in Brookstone's small but growing and profitable Internet business.
Janet Kloppenburg, an analyst at BancBoston Robertson Stephens thinks that Brookstone stock is a bargain. And she adds that the low price doesn't reflect the rapid earnings growth she foresees at Brookstone. For fiscal 1999, she estimates Brookstone will earn $1.27 a share. Analyst Barbara Miller of BT Alex. Brown sees Brookstone climbing to 19 or 20 in a year--or even six months.
BY GENE G. MARCIAL
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