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Aeropostale, Inc. Message Board

  • jonathan.loewer jonathan.loewer Aug 3, 2012 1:27 PM Flag

    ARO is Not Cheap Yet

    ARO earned 13 cents in the first quarter, were expected to earn 4 cents this quarter, and expected $1.45 for the entire year. This quarter has been revised down to ZERO cents for this quarter and just $1.25 for this year FY2013, and next year FY2014 earnings have been revised down 15 cents to $1.50. However, with this new downward trojectory, it is very possible that repeating last year's 85 cents is very likely. If that occurs, next year's earnings expectations could be revised down again from $1.50 down closer to $1.00.

    Therefore, if we give this company a P/E ratio of 12 (a very fair multiple for a company that expects no profitability for this quarter, and lowered expectations going forward) based on that range (85 cents to $1.25, the future value of this stock is $10.20 to $15.00.

    This stock is NOT A BUY, since its potential downside is greater than potential upside right now ($15-$13.35=$1.65 of upside, and downside is $13.35-$10.2=$3.15 of downside).

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