Vera Bradley (VRA) Stock Started Raising at Amazing Rates After Beating Estimates

Shares of Vera Bradley, Inc. (VRA) surged more than 20% on Wednesday's morning session after it reported better-than-expected results for the fiscal second quarter and provided an upbeat outlook.

The company reported lower earnings, $5.7 million or $0.15 a share, which were less than $7.6 million, or the $0.19 per share obtained in the same quarter a year ago but were higher than estimates by $0.04. Further, revenue increased by 1.4% and reached $120.7 million and was higher than analyst's estimates of $115 million.

For the third quarter of 2015 the Indiana-based company expects revenue in the range of $120 million to $123 million and EPS between $0.19 and $0.21.

Also, gross margin is expected to improve 400 basis points from a year ago to 46.5% to 47%. For the full year, it expects EPS of $0.72 to $0.78, on revenue of $487 million to $495 million.

"Our comparable sales trend began to improve toward the end of the quarter, which we believe is reflective of our new product offerings, improved in-store execution, and our initial marketing efforts," said Chief Executive Robert Wallstrom. "Our better than planned revenues were generated in spite of reduced promotional activity."

The company is selling at a reasonable valuation. The P/E ratio as of 9/02/15 is 18.78, which is lower than the S&P of about 21x and the industry median of 19.3x. This ratio indicates that the stock is undervalued, but not so far. Further, the P/B Ratio of 1.52x is close to 5-year low of 1.45x, and the P/S Ratio of 0.85x is close to 5-year low of 0.81x.

The handbag and accessory designer is working on a new web tech platform that will be complete at the end of 2016, and the aim is to increase e-commerce. The company has a strong balance sheet as well as a good liquidity position. Also, management has plans to reduce expenses so it will not surprise me if the stock hits the market more than is currently doing.

The stock plummeted 37.45% in a year-to-date basis and 38.83%in the past 12 months. Despite this, hedge funds were bullish in VRA shares in their latest filings. One fund sold out the stock and two funds reduced their holdings. On the other hand, two funds entered a new position in the stock and three funds increased their previous positions.

Mariko Gordon is the major shareholder, with a stake containing 3.66 million shares of the stock, valued at $41.27 million at the end of June. Another prominent investor in the stock is Jim Simons, who upped the stake by 191% to 1.21 million shares, valued at $13.58 million at the end of the second quarter.

Published on Sep 3, 2015
By Omar Venerio
Capital Markets, Derivatives and Financial Management Professor, Master in Finance and CFA candidate. I am an independent trader of stocks and options and passionate about the stock market.

Copyrighted 2020. Content published with author's permission.

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