The stock did see weakness during the sell off over the past couple months, but that just creates a nice buying opportunity.

Company Description

Delta Apparel is an international design, marketing, manufacturing and sourcing apparel company for a variety of branded and private labels.

Record-Setting Quarter

The third quarter report came on out on Apr 28 and showed a 16% increase in sales, to $125 million. Operating income jumped more than 65%, to $8.1 million.

Net income nearly doubled, to $5.7 million which works out to $0.65 per share. That was 15 cents higher than the Zacks Consensus Estimate giving Delta back-to-back surprises and 3 in the past 4 quarters.

Bullish Outlook

In the same press release the company raised its sales and earnings guidance for the rest of 2011. Analysts were right behind them.

The Zacks Consensus Estimate for fiscal 2011 is up 13 cents, to $1.79, which is a 15% growth rate. Next year's average forecast is up 1 cent, to $2.06 for a 15% growth rate.

Valuations

Shares of DLA are trading at just under 10 times forward estimates, which puts the PEG ratio at only 0.3. The price to sales is at just 0.3 and price to book is 1.1.

Industry Comparisons

Apparel companies similar to DLA rank 21st as a group, out of 265 industries. And, Delta is at the top of the 21 company grouping. They have a net profit margin north of 3% and an ROE nearing 11%. Both of those are slightly below the industry average though.

The Chart

Originally, the market loved the earnings surprise, but the stock was weighed down during that 6-week sell off we saw starting back in May. For now shares looks to be back on track and at a good overall entry point.

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service