Stock Buy: Brown Shoes Co.

Brown Shoes Co. (BWS: 12.99 0.00 0.00%) is pressuring its 52-week high just above $13 as estimates rise ahead of the company’s early March, Q4 results.

Company Description

Brown Shoe Company, together with its subsidiaries, operates as a retailer and wholesaler of licensed, branded and private label footwear. The company owns over 1,400 stores under the name “Famous Footwear” in the United States, Canada and China and has a market cap of $545 million.

Third-Quarter Results

If Brown’s Q3 results from late November are any indication, investors should be pleased. Although sales were mostly flat from last year, earnings came in better than expected at 42 cents, 8% ahead of the Zacks Consensus Estimate. The company has beat in each of the last four quarters by an average of 25%.

Brown noted that its results were driven by a strong showing on the ‘back to school’ front and ongoing operational efficiencies. The company’s gross margin expanded 2 points to 41.4% of sales during the quarter, while operating earnings jumped to 5.5% of net sales from 2.1% last year.

Brown also has a pretty solid balance sheet, with cash and cash equivalents up to $34.1 million against long-term debt of $150 million. The company has tapped $50 million of a revolving line of credit with $320 remaining.

Estimates Advance

Estimates have been on the move for the last few months, with the current year up 9 cents to 23 cents. The next-year estimate is up 15 cents to 63 cents, a bullish 171% growth projection.

Valuation

Looking at the current-year estimate, this stock looks very expensive, but taking the longer view with the bullish next-year estimate helps temper the valuation picture, coming in at 20X.

The Chart

Shares of BWS are currently pressuring the 52-week high above $13 after rallying for most of the last year on an improved economic outlook. Take a look below.