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Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on Citi Trends, Inc. (NASDAQ:CTRN) due to its excellent fundamentals in more than one area. CTRN is a financially-healthy company with a an impressive track record of performance, trading at a great value. Below is a brief commentary on these key aspects. If you’re interested in understanding beyond my broad commentary, take a look at the report on Citi Trends here.
Flawless balance sheet and good value
Over the past year, CTRN has grown its earnings by 47%, with its most recent figure exceeding its annual average over the past five years. Not only did CTRN outperformed its past performance, its growth also surpassed the Specialty Retail industry expansion, which generated a 8.4% earnings growth. This paints a buoyant picture for the company. CTRN is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This implies that CTRN manages its cash and cost levels well, which is an important determinant of the company’s health. Investors should not worry about CTRN’s debt levels because the company has none! This implies that the company is running its operations purely on off equity funding. which is typically normal for a small-cap company. Investors’ risk associated with debt is virtually non-existent and the company has plenty of headroom to grow debt in the future, should the need arise.
CTRN’s share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of CTRN’s earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the specialty retail industry, CTRN is also trading below its peers, relative to earnings generated. This further reaffirms that CTRN is potentially undervalued.
For Citi Trends, I’ve put together three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CTRN’s future growth? Take a look at our free research report of analyst consensus for CTRN’s outlook.
- Dividend Income vs Capital Gains: Does CTRN return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from CTRN as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of CTRN? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.