I am writing today to recommend the purchase of children’s clothing retailer Children’s Place (PLCE). The stock was down sharply yesterday despite reporting strong third-quarter earnings, as the company lowered guidance for the year as it will reduce some prices to win customers from competitor Gymboree, which is going out of business. In addition, there will be investments to support the rapidly growing online business of Children’s Place.
PLCE has been historically a solid performer with a high return on assets. I still believe earnings per share (EPS) can improve to $8.50 next year from a revised $7.75 this year, and the stock is a good value at 13X forward EPS. Buy PLCE under $115. My $130 target is where the stock traded yesterday before the company lowered estimates.