Even after a rather drastic pullback in stock price for Cache, Inc. (CACH) earlier this year, Zacks senior retail analyst Rob Plaza, CFA insists the company still trades at a fair valuation. Here's what his latest research report on the company had to say:
Cache reported first quarter results that were in line with the company's previously lowered guidance, and management reiterated its guidance for the second quarter and fiscal year 2007. In addition, Cache announced that it is acquiring its largest supplier, Adrienne Victoria Designs. The move will enable Cache to increase the amount of merchandise that it directly sources, which should help the company improves its gross margins.
Nevertheless, with the stock trading at a P/E [price-to-earnings]-to-growth ratio of 1.2x, CACH shares looks fairly valued. We maintain our Hold rating on the stock, as the risk/reward profile for the company is in balance.
CACH shares are trading at 21.7x our 2007 EPS [earnings per share] estimate and 17.1x our 2008 EPS estimate. We think the stock is fully valued given its growth prospects and strategic changes over the past year. We expect Cache's stock price to tread water as the market assesses the company's restructuring efforts. Our target price is $17, which represents our belief that the stock will track the overall market for the next six months.
Read the analyst report on CACH