The Truth For True Religion Apparel, Inc. (TRLG)

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Back to True Religion, there has also speculation that the company could be a takeover target. It has been reported that the likes of WWD and Sycamore Partners could be interested in purchasing the company. In late 2012, Nike sold off its Cole Haan unit to private equity firm Apax Partners for $570 million. From a valuation perspective, True Religion is indeed cheap, trading the lowest on both a price to earnings (next year earnings) and price to operating cash flow basis:

True Religion VF Corp Ralph Lauren Warnaco PVH Corp
Price to Earnings (next year earnings) 13.1 14 19 16.6 16.8
Price to Operating Cash Flow 12 13.9 17.1 20.7 15.2
Not only is the valuation compelling, the company’s leading position in profitability and balance sheet strength make it even more attractive:
True Religion VF Corp Ralph Lauren Warnaco PVH Corp
EBITDA Margin (TTM) 19.80% 14.80% 19.30% 11.90% 13.80%
Debt Ratio 0% 25% 0% 14.70% 26%
True Religion remains an interesting play in the niche retail business, as well as the small-cap industry, with a market cap that is below $750 million. Billionaire Jim Simons is one of True Religion’s big-name hedge fund owners (see Simons’ new picks here). Other top fund owners include Chuck Royce and Joel Greenblatt (check out all the hedge funds loving True Religion). The real thesis for True Religion shareholders includes the possibility of being rewarded with the likes of special dividends and buybacks. The retailer had over $165 million in cash at the end of the third quarter and no debt. The stock also pays investors a 2.9% dividend yield.

The article The Truth For True Religion originally appeared on Fool.com and is written by Marshall Hargrave.

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