Zumiez: A Super Stock?

10/21/2015 8:00 am EST


John Reese

Founder and CEO, Validea.com And Validea Capital Management

John Reese, editor of Validea, screens stocks based on the investing strategy of noted investment experts. This recommendation is based on the Price/Sales strategy of Kenneth Fisher.

Zumiez (ZUMZ) is a multi-channel specialty retailer of apparel, footwear, accessories, and hard goods. It operates 550 stores in the US, with 35 in Canada, and 18 in Europe.

Under the Fisher strategy, the prospective company should have a low Price-to-Sales ratio. Non-cyclical companies with P/S ratios below 0.75 are tremendous values and should be sought.

ZUMZ's P/S of 0.50 based on trailing 12-month sales is below 0.75, which is considered quite attractive. It passes this methodology's P/S ratio test with flying colors.

Less debt equals less risk according to this methodology. The company’s Debt-to-Equity of 0% is exceptional.

This methodology also looks for companies that have an inflation adjusted EPS growth rate greater than 15%. For Zumiez, this rate is 18.26%, which passes the test.

This methodology also looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses.

This is based on the premise that companies without cash will soon be out of business. ZUMZ's free cash per share of $1.85 passes this criterion.

The Fisher strategy looks for companies that have an average net profit margin of 5% or greater over a three-year period. ZUMZ, whose three-year net profit margin averages 5.99%, passes this evaluation.

Overall, based on this analysis, Zumiez would be ranked as a super stock according to Kenneth Fisher’s price-to-sales investment strategy.

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