'Impressive' Risk/Reward At Perry Ellis With 12x Multiple

Wunderlich said apparel firm Perry Ellis International, Inc. PERY is set for strong results in the coming quarters, with stock’s valuation remaining “impressive.”

The brokerage, which reiterated its Buy rating on Perry Ellis shares, believes the company is poised for revenue growth, margin expansion and bottom-line upside, primarily driven by its shift to higher branded items and international expansion.

Company Expectations

For the key holiday quarter, the company is rolling out Nike Inc NKE Swim into select Continental doors, while expansion of Callaway Golf Co ELY remains on track. Further, Wal-Mart Stores, Inc. WMT continues to expand the Ben Hogan line worldwide. Management expects international margins to remain strong.

Analyst's Take

“With PERY trading at approximately 12x our FY18 EPS projection, we believe the risk/reward remains impressive,” analyst Eric Beder wrote in a note.

In addition, Perry Ellis is focusing on reducing sampling time and costs, streamlining the distribution function and refocusing the supply chain to key players away from China.

The company believes there is the opportunity to add approximately 100 bp in gross margin from better inventory management.

At last check, shares of Perry Ellis were up 0.68 percent at $26.73. Beder has a price target of $35.