Fundamental Stock Analysis- Francesca's Holding Corporation

Investment opportunity in Francesca's Holding Corporation. Fairly valued stock with great growth opportunity and fantastic fundamentals (listed below.) Recent negative market sentiment has the stock trading near an all time low.

Below the Key statistics of the company I briefly outlined Francesca's Annual Report for Fiscal Year 2013.

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Brief Description of Business:
Francesca’s Holding Corporation FRAN ($14.70)- Francesca’s Owns and operates a chain of retail boutiques selling apparel, jewelry, accessories and gifts. Francesca’s is based out Houston, Texas with 3200 employees. Francesca’s Current Market cap is $620 Million with $346 million in revenue over the trailing twelve months.

Key Statistics:

• PE: 15
• FPE: 11.5
• PEG: .83
• EPS: $1.02
• Industry Average PE: 21.6
• Profit Margin: 12.3%
• ROE: 50.5%
• Net Income: $42.5 Million
• Revenue: $346 Million
• EBITDA: $81.1 Million
• Enterprise Value: $610 Million
• Total Cash: $25.4 Million
• Total Debt: $15 Million
• Debt- Equity: 17.9
• Current Ratio: 3.91
• Quick Ratio: 2.9
• Tax Rate: 39.32%
• Held By Insiders: 18%
• 52 Week Range: $13.12- $29.54

Compared to Competitors:
• PE is lower than 78% of competitors in Retail Apparel industry.
• ROE is higher than all peers in industry.
• Francesca’s controls costs better than 95% of peers.

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Francesca’s Holding Corporation
Summary of Annual Report
For Year Ended February 1, 2014

General:
Growing specialty retailor with 451 stores in 45 states and D.C. area. Estimated to have approximately 900 stores in US over the next 6-7 years. Over the last two years, on average, new boutiques have generated first year cash return on investment of 150 % and paid back investment in less than one year. Francesca’s owns no real estate and leases all boutiques as well as their headquarters.

Growth Strategy:
• Grow number of boutiques. Francesca’s added 91 boutiques in 2013 and 85 new boutiques planned for 2014.
• Drive sales by expanding direct to consumer business. Website sales increased by 92% in 2013- accounting for 2.6% of total sales. Board of Directors believes there to be huge potential in direct to consumer business.
History:
Founded in 1999 in Houston, Texas with the company’s IPO in July 2011. Merchandise is shipped to stores 5 days a week with a broad selection but limited amounts. Only two boutiques have closed sense 2009. Francesca’s does not manufacture own clothing, but buys from venders. Top ten vendors account for 33% of purchases. No single vendor accounts for more than 6% of purchases. California currently has 45 boutiques, making California Francesca’s largest market.

Purchases of Equity Securities by the Issuer:
On September 3, 2013 the BOD announced a $100 million buyback plan. Between November and February 925,000 shares have been repurchased with still $45 million more to purchase.

Management Discussion and Analysis of Financial Condition:
• Net sales increased by 15% in 2013. Driven by 91 new boutiques.
• Selling, general and administration expenses increased by 26% or $21.2 million in 2013. Increases were due to added boutique payroll and corporate payroll due to expansion.
• SGA expenses increased to 29.9% of net sales from 27.2% in 2012.

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