XO Group Inc (XOXO): Wedding Bells and Cash Registers Ring in Harmony for This Stock

Signet is the largest specialty jeweler in the U.S., with its engagement and wedding rings sold under its flagship Kay and Jared brands. It has an edge relative to its competitors in attracting couples given that it has an in-house credit program, which contributed more than half of its U.S. sales. This is because couples working with a tight budget will definitely leverage any form of financial aid to add some sparkle to their wedding. Signet Jewelers Ltd. (NYSE:SIG) guided for capital expenditures between $180 million and $195 million for fiscal 2014, driven by the opening of 70- to-80 new stores and store remodels.

About 50% of U.S. engagement rings bought online are transacted on Blue Nile Inc (NASDAQ:NILE)’s e-commerce website, according to a recent Bloomberg article. In the first quarter of fiscal 2013, Blue Nile’s U.S. engagement net sales rose 19.0% year-on-year, while its U.S. non-engagement net sales increased by a more modest 7.4%. The lower growth in non-engagement sales is reflective of the seasonality of gift giving. Blue Nile’s international business also represented about 16% of its fiscal 2012 sales. While management guided for about decent 10% growth in fiscal 2013 full- year revenue, it is not a pure proxy for U.S. wedding and associated spending given its non-engagement and international exposure.

Conclusion

Started in 1996, XO Group Inc (NYSE:XOXO)’s flagship site The Knot is the largest and oldest of its kind, with 4.5 million unique visitors and more than 190,000 followers on Facebook Inc (NASDAQ:FB). It benefits from the ‘winner takes all’ phenomenon, keeping its smaller competitors and new entrants at bay. In addition, XO Group is attractively valued at 8.6 times trailing-12 months EV/EBITDA, with its net cash balance representing more than a quarter of its market capitalization. This stock is a buy in my books.

Mark Lin has no position in any stocks mentioned. The Motley Fool recommends Blue Nile. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Wedding Bells and Cash Registers Ring in Harmony for This Stock originally appeared on Fool.com and is written by Mark Lin.

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