The Wet Seal, Inc. (WTSL), Aeropostale, Inc. (ARO), Abercrombie & Fitch Co. (ANF): Is This Teen Retailer Ready To Trade Higher?

Aeropostale, Inc. (NYSE:ARO) is the cheapest on a price/sales basis, followed by Wet Seal. Aeropostale should have room to improve its margins as well. However, because of Aeropostale’s rapid fundamental declines, the market has priced it as a worst case scenario.

On the other hand, Wet Seal is priced below Abercrombie & Fitch Co. (NYSE:ANF) and American Eagle, and because of Wet Seal’s fundamental improvements, investors should like its prospects moving forward.

Final thoughts

Wet Seal is cheap and is fundamentally improving in a sluggish teen retail environment. Aeropostale, Inc. (NYSE:ARO) is cheap, but its fundamental decline apparently has no end. Abercrombie and American Eagle have strong margins, yet with fewer consumers coming into their stores, I am not sure how investors can be optimistic about maintaining those large returns.

In my opinion, Wet Seal is set apart as the best in this space. I have looked at stock and fundamental performance, and valuation, which all suggest Wet Seal as a good buy. With that said, teen retail outlooks can change in the blink of an eye — apparent with the three noted companies — and if buying Wet Seal, I’d closely monitor the company’s performance. But at this point, following a great quarter, it looks as though Wet Seal has room to run higher.

The article Is This Teen Retailer Ready To Trade Higher? originally appeared on Fool.com and is written by Brian Nichols.

Brian Nichols has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 

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