Abercrombie & Fitch (ANF), which yields 4.9%, is an undervalued small cap stock — and a recommendation in our "buy low opportunities" portfolio, suggests Crista Huff, editor of Cabot Undervalued Stocks Advisor.

The company reported adjusted third-quarter 2019 EPS of $0.23 and revenue of $863.5 million. It delivered their ninth consecutive quarter of positive U.S. comparable store sales (comps) and their third consecutive quarter of total revenue growth on a constant currency basis.

Management reported U.S. comps up 3%, with all brands showing increases, offset by international comps down 8% and foreign currency headwinds. Protests in France, Spain, and Hong Kong, and general tension over Brexit, have affected international sales.

Management is working through a multi-year process of updating and right-sizing their stores. They delivered 34 new store experiences during the quarter and 70 year-to-date, remaining on track for their goal of 85 new store experiences this year.

The company repaid $10 million of debt and repurchased 412,000 shares of stock during the quarter, and repurchased 3.96 million shares of stock year-to-date. The share count is down 8% since year-end 2017.

The company has 881 stores operating right now. The Hollister store count is up seven for the quarter and 12 year-to-date. The A&F store count is up 11 for the quarter and eight year-to-date.

Wall Street projects EPS to fall 34% in 2019, then rise 74% in 2020. The 2020 P/E is 11.9. I expect the stock to perform well in 2020, but share price performance for the balance of 2019 remains a wild card. The stock presents a great value to patient investors.

Guess?, Inc. (GES) reported $0.22 third-quarter adjusted non-GAAP earnings per share vs. the $0.18 consensus estimate, and above all analysts’ estimates. Revenue was $616 million, up 2% year over year, but a bit shy of the $620.3 million consensus estimate.

On a regional and segment basis, Europe, Americas Wholesale and licensing were strong, while Asia and Americas Retail were weak. The Asia business segment was partly affected by macro trends that include the trade war and Hong Kong protests. Revenue growth in Europe outperformed all other business segments, up 9.1% in U.S. dollars and 13.2% in constant currency.

The company repurchased 16.4 million shares of stock during the first nine months of their fiscal year. Management raised the low end of this year’s EPS guidance from $1.28-$1.36 to $1.31-$1.36. I don’t expect that to change the current consensus EPS estimate of $1.34, reflecting 37% growth.

However, Guess’ ongoing quarterly successes could inspire analysts to raise fiscal 2021 estimates, currently reflecting 21% growth.

The stock remains undervalued, offering the strongest multi-year earnings growth of all established U.S.-based apparel retailers. No matter what the share price does today, I think GES is the most important clothing stock for investors to own in the coming years. I rate the stock a strong buy.

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