Is Guess’s Stock a Trendy Buy?

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With shares of Guess (NYSE:GES) trading at around $26.12 is GES an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Guess is a difficult company to figure out. There are many mixed signals. In North America, there has been a slight decrease in sales over the past year. Europe is “less worse” than in the past, and Asia is performing well.

For Q3 2012, revenue was down 2.2% compared to Q3 2011. On the other hand, revenue of $628.8 million came in ahead of a $624.8 million expectation. Guess is projecting a slight decrease in revenue for 2013 due to economic conditions impacting the market.

Positives include a Forward P/E of 10.73, a 3.10% yield, better performance in Italy, and strong performance on a constant currency basis. CEO Paul Marciano has also stated that he sees global brand stabilization.  

Negatives include high occupancy costs, increased investment costs, shrinking margins, and the Women’s category performing poorly in North America. There is also a 10% short position on this stock, which is high. However, this can be looked at as positive or negative.

E = Equity to Debt Ratio is Strong

Guess has a debt-to-equity ratio of .01, which is strong. Aeropostale (NYSE:ARO) has a debt-to-equity ratio of .00. The Gap (NYSE:GPS) has a debt-to-equity ratio of .39.

When it comes to the balance sheet, Guess has $294.64 million in cash and $8.74 million in debt. Aeropostale has $184.46 million in cash and no debt. The Gap has $1.77 billion in cash and $1.25 billion in debt. All of these numbers are healthy.

T = Technicals on the Stock Chart Are Subpar

Guess and Aeropostale have a lot in common when it comes to stock performance over the past three years. The Gap has dominated this competition by a landslide. Below is a chart showing the differences in the performances for each stock.

1 Month

Year-To-Date

1 Year

3 Year

Guess

5.60%

-11.74%

-6.15%

-35.39%

Aeropostale

6.48%

-7.28%

-13.09%

-26.74%

The Gap

-1.71%

88.45%

88.06%

70.92%

 

At $25.75, Guess is currently trading slightly higher than its 50-day SMA of $24.88. It’s trading slightly lower than its…

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