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Urban Outfitters (URBN) Soars to a 52-Week High, Time to Cash Out?

Zacks Equity Research
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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Have you been paying attention to shares of Urban Outfitters URBN? Shares have been on the move with the stock up 3.1% over the past month. URBN hit a new 52-week high of $43.58 in the previous session. Urban Outfitters has gained 16.4% since the start of the year compared to the 7.8% move for the Retail-Wholesale sector and the -5.4% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on May 22, 2018, Urban Outfitters reported EPS of $0.38 versus the Zacks Consensus Estimate of $0.3 while it beat the consensus revenue estimate by 2.22%.

For the current fiscal year, Urban Outfitters is expected to post earnings of $2.38 per share on $3.88 billion in revenues. This represents a 42.51% change in EPS on a 7.36% change in revenues. For the next fiscal year, the company is expected to earn $2.62 per share on $3.95 billion in revenues. This represents a year-over-year change of 10.2% and 1.72%, respectively.

Valuation Metrics

Urban Outfitters may be at a 52-week high right now, but what might the future hold for URBN? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Urban Outfitters has a Value Score of B. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 17.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 14.1X versus its peer group's average of 9.1X. Additionally, the stock has a PEG ratio of 1.43. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Urban Outfitters, Inc. Price and Consensus

 

Urban Outfitters, Inc. Price and Consensus | Urban Outfitters, Inc. Quote

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Urban Outfitters currently has a Zacks Rank #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 or 2 (Buy) and Style Scores of A or B, it looks as if Urban Outfitters passes the test. Thus, it seems as though URBN shares could still be poised for more gains ahead.

How Does Urban Outfitters Stack Up to the Competition?

Shares of Urban Outfitters have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Xcel Brands XELB, Buckle, BKE, and Ulta Beauty ULTA, all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 34% of all the industries we have in our universe, so it looks like there are some nice tailwinds for URBN, even beyond its own solid fundamental situation.


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Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
 
Buckle, Inc. (The) (BKE) : Free Stock Analysis Report
 
Xcel Brands, Inc (XELB) : Free Stock Analysis Report
 
Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report
 
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