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<P>Aeropostale's Valuation Seems Too Cheap In this article, we explain why we are long Aeropostale (NYSE:ARO). ARO has historically been a wellmanaged retailer experiencing strong growth, aboveaverage margins, and high returns on capital. While the company is operating at peak margins, has a maturing store base and faces <a href="http://www.monclerstore.co.uk/"><STRONG>moncler uk outlet</STRONG></a> tough prior year comparisons, the stock's current valuation nevertheless seems too cheap. ARO trades at 4.1x EV/EBITDA and 10x P/E.</P> <P>In addition, in the event of a doubledip recession, ARO is better positioned than most other teen retailers, given its lowprice status within the teen fashion segment.</P> <P>Business DescriptionA (the "Company") is a mallbased specialty retailer of casual apparel and accessories. As of October 30, 2010, the company operated 958 A stores, consisting of 904 stores in 49 states and Puerto Rico and 54 stores in Canada. The A banner designs, markets, and sells merchandise principally targeting 14 to 17yearold young women and men. The company offers a collection of apparel, including graphic tshirts, tops, bottoms, sweaters, jeans and outerwear, as well as accessories, including sunglasses, belts, socks and hats.</P> <P>The company's IPO occurred in May 2002, and the company has grown from 300 stores, $550m of revenue and $60m of EBITDA in FY 2002 to 950 stores, $2.2bn of revenue and $440m of EBITDA in FY 2009. That tremendous growth was done with no acquisitions and no equity raises since 2004. In fact, outstanding shares have steadily declined from 127m shares in 2004 to 88m shares today, thanks to share repurchases. The stock has risen more than 7x in the past seven years. Here are some relevant charts demonstrating ARO's impressive growth. from A stores, which cater to children ages 7 to 12, and pursuant to a licensing agreement, the company had <a href="http://www.monclerstore.co.uk/"><STRONG>moncler uk</STRONG></a> an international licensee which operated eight A stores in the United Arab Emirates.</P> <P>Operating TrendsThe ARO of today is obviously not the ARO of 2003. Management has previously guided that the A store <a href="http://www.monclerstore.co.uk/"><STRONG>moncler uk store</STRONG></a> base would mature at 1,000 to 1,200 stores. At the most recent quarterend, the A store count stood at 958. If we assume a store unit growth rate of 5% to 10% in future years, which is below the company's historical average of 10% to 15%, we should see a mature store base within several years.</P>
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