We came across a bullish thesis on The Children’s Place, Inc. (PLCE) on Twitter by EagleFangCapital. In this article, we will summarize the bulls’ thesis on PLCE. The Children’s Place, Inc. (PLCE)’s share was trading at $10.17 as of Jan 22nd. PLCE’s trailing and forward P/E were 6.61 and 8.54 respectively according to Yahoo Finance.
A young boy happily shopping in a children’s apparel retail store.
In its most recent quarter, PLCE reported $455 million in sales, a 3.4% increase quarter-to-date driven by strong wholesale performance, and is projected to end the quarter flattish with sales between $450-460 million. Gross margin is expected to improve significantly, with an anticipated 30% GM, a sharp recovery from last year’s 21.7% disaster, as the company has been running closer to 35% throughout the year. Selling, general, and administrative expenses (SGA) are forecasted at $100 million, similar to Q3 levels, translating to EBITDA of $35-38 million, compared to $44.5 million in Q3 and $23 million in the seasonally weaker Q2. While the calendar shift affected Q3, there could be lower sales but higher gross margin in Q4, bringing EBITDA close to the Q3 figures. With $100 million+ of EBITDA over the first nine months and an improved Q4, a baseline of $125-130 million for the year seems achievable. The company’s capital expenditure is expected to be around $25 million, and with interest expense starting to decrease, a path toward generating real free cash flow and reducing debt begins to take shape in the coming year. Even if free cash flow per share comes in at $3 instead of $5 due to the rights offering, the current $10 share price appears significantly undervalued, making it an attractive opportunity moving forward.
The Children’s Place, Inc. (PLCE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 9 hedge fund portfolios held PLCE at the end of the third quarter which was 13 in the previous quarter. While we acknowledge the risk and potential of PLCE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLCE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
