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Five 52-Week High Fliers For August 28
Posted: Aug 28, 2008 15:53 PM by Glenn Curtis
When a company hits a 52-week high or a multi-year high, there is a natural tendency to assume that the stock must be overvalued. Sometimes this instinct is correct, and there is little chance of further gains, but new highs don't always signal overvalue.
Have you ever heard of Google (Nasdaq:GOOG)? How many people are kicking themselves right now because they sold out when the stock hit one of its countless new highs?
If the underlying business is humming and the outlook remains solid, it's always possible that the shares could continue to make new highs. Of course, therein lies the key - trying to assess whether a company's prospects are bright. (For more on valuing companies, read our article Relative Valuation: Don't Get Trapped.)
Unfortunately, there is no sure fire way to test if a company has peaked. Analyzing companies can be very subjective - like judging a gymnastics contest. Two people can look at the same situation and come to two very different conclusions. Below is a list of companies that are trading near their 52-week highs and are deserving of additional research.
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Company
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12-Week
Price Change
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Market Cap
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Almost Family
(Nasdaq:AFAM)
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76.8%
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$338M
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EnergySouth
(Nasdaq:ENSI)
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17.9%
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$497M
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Fred’s Inc (Nasdaq:FRED)
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17.72%
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$578M
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Lufkin Industries
(Nasdaq:LUFK)
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12.83%
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$1.34B
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New York & Co.
(NYSE:NWY)
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39.44%
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$678M
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Data as of market close August 27, 2008
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Fred's has it All
A great deal has been written about how the tough operating environment in retail these days; however, discount retailer Fred's seems to be faring pretty well all things considered. Fred's sells everything from housewares and school supplies to bath products
Second quarter sales increased 5% to $447.0 million from $424.6 million in the same period one year ago. The Street had been looking for a top line of $437.84 million. Taking out store shut-down charges, sales actually increased 7%. Another interesting tidbit was that its same store sales rose a healthy 4.9%. That's a nice jump over the 0.8% increase it turned in during the comparable quarter last year.
Net income came in at $1.0 million which is earnings per diluted share of 3 cents. This included charges associated with the closing of 50 stores and one pharmacy. These closings were announced earlier in the year as part of a plan to close 75 underperforming stores and 22 pharmacies. Once you bring these charges back in, net income sits at $4.2 million, or 10 cents per share.
The company is expected to earn 71 cents per share in the current year and 81 cents next year. Given that the stock currently trades right around $14, that's not cheap, but there could still be value there.
Bottom Line
This is retail, and although Fred's seems to be performing now, there's no guarantee that will be the case tomorrow. That said, momentum coupled with solid fundamentals could make for a solid investment.
Learn to buy high, and sell even higher in our related article Riding The Momentum Investing Wave.
By Glenn Curtis
Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.
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