True Religion Apparel, Inc. (NASDAQ:TRLG)

Enterprise Value is $480MM after today's close; FCF is about $45-50MM per year (Expected to be $50MM in 2012). Gross Margins actually increased in 2011. Same store sales were up 11% from 2010. The company added 15 stores in the US and 9 stores abroad; expects to add another 27 stores in 2012.

The operating segments that saw sales declines were basically wholesale US and wholesale int'l. The biggest problem seems to be SG&A, which is likely easier to fix than something like input costs. The company has a huge cash balance - could become a PE target.

Hair cut today for being a poser. The product is infectious and little kids and loaded parents spending habits, in America, will never change,-unless the Mayans are right !! Boom

I believe True Religion App will bring in 104.83 points considering a 15% S&P performance. My target is $ 3.51.

strong growth in book value per share and sales. Popular luxury item that may not be a lasting brand but does have a strong growth potential over the next few years.

True Religion Jeans is a fantastic company to invest in. They carry no debt whatsoever, whilst maintaining growth every quarter. I expect them to remain stable for the next 5+ years.

True Religion Apparel Inc. is a premium clothing retailer specializing in high-end denim products and related sportswear apparel. As of 2009, it operated 70 branded stores in the United States and planned on adding 28 more stores in 2010. 41.5% of its total revenue come from consumer direct business, 39.6% from US Wholesale at premium retailers such as Saks, Neiman marcus, and Bloomingdales, and 17.5% of total revenue from international upscale boutiques.

With the latest recession, one would expect that consumers would have cut down on high-end apparel, but True Religion was able to expand operations, cut costs while increasing gross profit margins, keep a stable net earnings to revenue ratio, and increase their retained earnings reserves. It's most recent quarterly filing indicated a 9% jump same-store sales.

In terms of key metrics, TRLG trades at Market Cap of 540.73M and an Enterprise Value of 382.73M. It has a trailing P/E of 12.14 with a forward P/E of 10.18, a PEG ratio of .61, a P/S ratio of 1.53, a P/B ratio of 2.29, a P/C ratio of 4.14, and a P/FCF ratio of 12.84. In addition to these ratios, TRLG displays a 14.47% ROA, 20.59% ROE, 19.57% ROI, with a Current Ratio of 8.26 and a Quick Ratio of 6.36. With a 5 year EPS growth rate of 20%, it exhibits a .29 EV/OCF/G ratio. Finally, it shows an EV/EBITDA ratio of 4.56.

Examining the company's annual income statements and balance sheets under a Buffet lens, we see a durable comparitive advantage prospect. Since 2006, TRLG has increased it gross profit margins and has kept a relatively steady ratio of Selling, General & Administrative expenses to gross profit. In addition, the company holds no long-term debt and has been piling up its retained earnings.

One concern that threatens True Religion's future is the price of cotton. With cotton trading at historical highs, it has been difficult for True Religion to meet earnings for the past two quarters. Another concern is TRLG's enormous short float of 23.52%. Why is everyone so short? With a short ratio of 15.05, however, any very positive price action in TRLG could trigger a violent short squeeze. One last concern is the magnitude of TRLG's current ratio and quick ratio. Why are they hoarding their cash? How could they be using it differently?

One of TRLG's main competitors is JOEZ (Joe's Jeans), but a quick look at JOEZ's income statement and balance sheet sets TRLG apart. Not to mention JOEZ's EV/EBITDA ratio of 10.89 versus TRLG's of 4.56. While JOEZ may look superficially cheap, and has the following of the many online investors, the company just isn't what it is cut out to be.

True Religion is an undervalued company with attractive ratios and impressive internal economics. In the future, True Religion plans on opening a greater number of brick-and-mortar stores in order to free itself from corporate wholesale in order to better control its sales and margins. TRLG has established short term support at around $19.70, and longer term support between $17.50 and $18. With an immanent 23.6 Fibonnaci retracement level break at $21.50 in TRLG's near future, TRLG's next target will be $24. We are in the midst of a long term downward trend reversal that cannot be passed up.

Value and Growth!!!

This apparel longshot could surprise big.

Stock screen results. Using ROE, PE, LT debt/Equity, Current Ratio.

I really need to put this on the board here so if this one underperforms from this point forward, I'd really like to find out how. Its TTM EPS is around 1.80 or so. Its operating with a OM of low 20s, and in its hay day has gone as high as low 30s. But even high teens is considered awesome for retailers of this type. So my bet is, even if same store sales become negative for some time, this one will outperform. Just give it a timeframe of 3 years from now. We'll see. In the past, I have heard analysts make lame excuses for to call a stock underperform. For e.g they are operating at peak capacity or top margins. See ARO and BKE, analysts call it either neutral or sell for that reason. BEcause they have got an A+ in the recent quarters.

Consistent past growth and huge potential to expand in US and internationally.

I like everything about this stock except the final products prospects. To me it is a gamble that will pay off if you think more people (mainly in the US) are willing to spend big bucks on jeans during real or perceived difficult times.

Consumer spending should continue to rise for the rest of 2010 and into 2011. High end clothing producers such as TRLG should benefit the most from this recovery as consumers begin to get more comfortable for shelling out $200 to $300 for a pair of jeans. TRLG has also positioned themselves as a premier brand in the high end Denim arena.

True Religion Apparel (NASDAQ: TRLG)
120 Second Thesis: True Religion operates in an extremely competitive industry, but in just eight years has established itself as a top brand in the rapidly growing premium denim market, which is over a 16 billion dollar market. In addition, they have expanded beyond denim into other apparel and are aggressively expanding their retail presence. Despite their high growth, they have no debt, over 100M in cash, and six straight years of positive FCF. Given one of the worst economic environments in years for a premium retailer, they grew sales by 15% and earnings by 6.7%. The current market price expects about 9% cash flow growth for the next ten years, before a 2% terminal rate, which I believe is extremely conservative given their opportunities to:

1) Grow their Consumer-Direct Business through new retail-branded stores, which has much higher operating margins than their wholesale business
a. They opened 28 stores in 2009 (ending the year with 70), and plan to add an additional 28 stores in 2010 and 2011
2) Continue to Increase their International Presence
b. Their merchandise has been sold in international markets through independent distributors and select retailers since 2003. In 2008, they established a company-owned business in Japan, their first foreign investment, which was designed to serve wholesale customers and open True Religion Brand Jeans stores in Japan. In 2009, they opened a regional office in Hong Kong and hired a general manager for the Asia Pacific region to continue developing their business in Japan, South Korea, Hong Kong and China. In 2010, they expect to open branded retail stores in London, England and Tokyo.
3) Improve the efficiency of their wholesale business
c. They recently terminated their U.S. Wholesale sales agent agreement and hired a Vice President of U.S. Wholesale sales, a COO, and several internal sales agents to work more closely with their wholesale customers. In addition, management believes that they can double the number of boutiques (based on competitor’s numbers) in which they sell their products.

What is Stock Advisor-like about this company: The Company has an expandable market opportunity, is very cheap on an EV/EBITDA basis, and has excellent founder-led management.

Valuation and Key Metrics: Market Cap: 737M, EV/EBITDA: 7.45, ttm PE: 15.45, Forward PE: 12.40, PEG Ratio: 0.45, 2009 Sales increased 15% yoy to 311M, Net Income up 6.7% yoy to 47.3M

Quick Review of Management: Jeffrey Lubell has been in the fashion industry since he was 21 year old. He founded True Religion in 2002 after more than 20 years working with exotic fabrics, boosting various denim brands, and creating enduring fasion styles. His sole aim was to create something completely new. “I didn’t want to follow the trend, I wanted to create my own trend,” Jeffrey, 52, declared. He currently owns about 4% of shares outstanding and is very active in protecting the premium brand. An example of this is his decision to reduce sales to their wholesale off-price channel. “We believe that this level of sales in this channel is not helpful in building our premium, long term, brand position.”

Recommendation: The jeans are expensive, but the shares are cheap. With shares trading below $30, I recommend that we immediately initiate a long position in this growing retailer. The company was resilient during the downturn, but will show its real strength in an economic recovery.

This company is way over extended, while it does show great earnings in the past 3 years the current price reflects absolutely zero chance for undervaluation.

A nice growth company with no debt. While I personally believe shelling out hundreds of dollars for jeans is insane, I also believe most people in this world are insane. Alot of room to grow here as the brand name continues to broaden, not to mention the short squeeze that should take place once the shorts actually look at the numbers. As a nice hedge, I'd short BEBE, their financials show no reason for promise.

Low PE high growth rate.

They will announce fourth quarter results on Feb 24. I think the company is way undervalued and have a target at $78/share.

Even very smart women are willing to blow 200+ on these jeans. PEG is too good to be true.