Limited Brands Inc - Aggressive Growth

Limited Brands (LTD) continues to report fantastic same-store sales figures, leaving analysts no choice but to raise estimates.

This Zacks #1 Rank (Strong Buy) is also trading with great valuations, in addition to strong growth rates.

Company Description

Limited Brands operates about 2,700 stores in the U.S. and another 700 international locations. Notable brands include Victoria's Secret, Bath & Body Works and La Senza.

November Sales

On Dec 2 Limited Brands reported a 10% increase in comparable store sales for November. Total sales rose to $893 million, up more than 14%. The sales momentum came on the heels of a solid quarterly report.

Q3 Better than Expected

On Nov 17 Limited Brands announced operating income of just over $149 million, which was more than double the $59 million from the same period last year. Net income increased 10-fold to $61.3 million.

Earnings per share came out to 18 cents per share which is 16 cents better than last year and 1 cent ahead of the Zacks Consensus Estimate. This was the seventh earnings surprise in the past 8 quarters.

Consensus Rising

In the same press release, the company raised its outlook, which caused analysts to do the same. The Zacks Consensus Estimate for fiscal 2011 is up 12 cents in the past 2 months, to $1.97.

Next year's forecasts rose 14 cents on average, to $2.20. After earning $1.23 last year, the annual growth rates are now expected to be 60% this year and 12% in 2012.

Valuations

While Victoria's Secret may get headlines for showcasing multi-million dollar jewel-encrusted bras, you don't have to pony up too much for the stock.

Shares are trading at roughly 14 times next year's estimates. This gives LTD a PEG near 0.9, both presenting solid value. Limited Brands has a price to sales ratio of 1.1, which is in line with similar companies.

The Chart

The sharp drop in share price in early December was when shares went ex-dividend. In the previously mentioned quarterly report, Limited Brands also announced a special $3 dividend.

Currently shares are resting one what should act as a reliable support level moving forward, making for an excellent entry point.

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
 
LIMITED INC (LTD): Free Stock Analysis Report
 
Zacks Investment Research