Last night Joe's Jeans reported a great quarter, with 16% top-line growth Q/Q. Numbers look great, with improvements in gross margins and further improvements in net margins resulting in great EPS numbers of $0.02 for the Q. In addition, further improvements are expected due to moving some production to Mexico and other lower-cost areas next spring.
The stock is currently at $1.17, after trading as high as $1.33 in the pre-market this morning.
If revenues can continue to increase at 15% Y/Y, a valuation of $2.25 to $3 or higher could make sense based on 15x 2014 estimated EPS of $0.15 to $0.20. That assumes no improvements in margins or SG&A. However, if revenues only increase 5% Y/Y then the valuation looks more like $1.50 to $2.
So what is the right price for $JOEZ? Do you think they can grow top line by 15% Y/Y to be a $3 stock, or do you think they will grow more slowly, in which case the current price is fair?
Written by Jennifer Galperin. Follow me on twitter and StockTwits