(By Balaseshan) Brean Capital analyst Eric Beder continues to believe there is the potential that True Religion Apparel Inc. (NASDAQ: TRLG) will be acquired in the near term.
Beder said after almost constant disappointments, True Religion came through with a solid 4Q, easily beating Street (and his doomsday) projections, driven by positive domestic comps and the stirrings of a turn in the international segment.
Further, guidance for 2013 of mid single-digit bottom-line expansion, after two years of frustrating inertia, represents a key step forward in reigniting investor interest in the name, the analyst noted.
With the women's business slowly improving and management getting a much better feel for managing the international business after a frustrating period, Beder believes the potential for the brand to regain momentum is rising.
When Beder throws in a cash rich balance sheet (net cash per share of $8.51 at the end of 2012), a dividend yield of 3.4% and a cash adjusted price-to-earnings (based on 2014 EPS of $2.18) of 7.0 times, he thinks the risk/reward in TRLG is impressive; he remains a buyer of the stock.
The analyst said the company's 4Q was a quarter of progress as the pieces are slowly coming to affect a turnaround in the international segment and the tough women's arena. He is pleased that True Religion management, even in the midst of a potential sale of the company, remains focused on maximizing returns.
At current valuations, Beder believes the Street has forgotten the company's continued ability to register solid free cash flows and premium margins; a few more quarters like 4Q-2012, and he believes it will be inevitable that investors will "wake up" and give TRLG the credit it deserves.
The brokerage raised its 2013 EPS estimate to $1.92 on revenue of $512.6 million from $1.79 on revenue of $499.8 million, while establishing its 2014 estimate of $2.18 on revenue of $563.6 million.
TRLG is trading up 20.51% at $28.62 on Thursday.