This Retailer May Be One of the Only Undervalued Stocks Left

The small-cap retail stock has demonstrated promising growth potential

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Casual footwear retailer Tilly’s, Inc. (NYSE:TLYS) operates well over 200 retail locations across the United States. Tilly's will be reporting earnings today after the close, and investors will be looking for Tilly's stock to replicate its strong post-earnings performance from its most recent quarterly report.

But first lets dig into the technicals. Although Tilly's stock is down 16% in 2020, it's tripled off its April 3 all-time low of $3.46. As TLYS digs out of penny stock territory, the shares' 120-day moving average has contained pullbacks from October and November. Last seen trading at $9.13, the equity is settling right around its post-bear gap levels from January.

TLYS Stock Chart
Tilly’s stock has outperformed expectations on three of its four most recent earnings reports. This has resulted in post-earnings pops of 16.8% (December), 17.5% (March), and 5.8% (September). Overall, the stock has averaged a post-earnings move of 13.3% in the last eight quarterly reports, regardless of direction. For tonight, options traders are bracing for a larger-than-usual move of 15%.

On top of its noted resilience, the company has an amazing price-to-book value of 1.76, meaning the company’s stock sells at nearly the same price as its equity per share is worth. In addition, its forward price-earnings ratio is at an attractive 12.48.

The biggest fundamental issue right now for Tilly’s as a company worth investing in seems to be its relatively slow growth rate. The company has only increased revenue by about $40 million since 2017. Nonetheless, Tilly's continues to grow at a pretty steady rate. Overall, TLYS still has the potential to recover about 50% more over the coming 12 months.

 

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