Buy Guess?, Inc. (GES) Before It Rockets Upward

Meanwhile, Abercrombie & Fitch Co. (NYSE:ANF) continues to struggle due to its higher price point, from which consumers have fled amid a stagnant U.S. economy. This is strong evidence that Abercrombie’s brand provides no real competitive advantage. In addition, the company is currently executing a plan to close 180 locations, which is not a good sign for revenue growth going forward.

Like Abercrombie, American Eagle Outfitters (NYSE:AEO) is also heavily exposed to the U.S. market. The U.S. has become saturated with teen fashion brands, and further competition from H&M, Forever 21, and others is causing American Eagle’s margins to deteriorate. The extreme saturation of the U.S. market, in addition to the increasing competition, makes American Eagle’s growth prospects less promising than that of Guess?, Inc. (NYSE:GES).

Bottom line

The industry isn’t pretty, but it is hard to argue against a stock trading for 10x normal free cash flow before growth. As a result, Guess?, Inc. (NYSE:GES) looks a like a bargain in an unloved industry.

The article Buy This Stock Before It Rockets Upward originally appeared on Fool.com is written by Ted Cooper.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.