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Value

Will The Jones Group Inc.'s (JNY) brands be strong enough to counter a weakening consumer? This Zacks #1 Rank (strong buy) has seen its shares sell off over the summer making it a cheap value stock with a forward P/E of just 6.9.

The Jones Group Inc. markets 35 well-known brands in apparel, footwear, jeanswear, jewelry and handbags. Its brands and licensing agreements include Nine West, Jones New York, Ann Klein, Rachel Roy, Stuart Weitzman, Easy Spirit, Gloria Vanderbilt, l.e.i, Joan & David, Kasper, Jessica Simpson, Dockers and Sam & Libby.

Beat By 32% in the Second Quarter

On July 27, The Jones Group reported its second quarter results and surprised on the Zacks Consensus for the third quarter in a row. Earnings were 33 cents compared to the consensus of 25 cents.

Revenue rose 3.2% to $888 million from $860 million in the year ago quarter. The company was pleased with its control over inventories and brand management.

It is also seeing a strong impact from the acquisition of the Stuart Weitzman brand a year ago, both domestically and internationally. The higher-end brands have been hot in the emerging markets, especially Asia.

Zacks Consensus Estimates Rise

It seems like forever since the company last reported. A lot has happened in the global economy since July 27. But analysts are still bullish on the full year.

The 2011 Zacks Consensus Estimate has risen to $1.34 from $1.27 in the last 2 months. But this is actually negative growth of 11% compared with 2010 where the company made $1.51 per share.

But its expected to get back on the growth track in 2012, with earnings growth of 15.2%.

Value Fundamentals Are Strong

Shares of Jones Group have been weak for most of 2011 but they sold off even further during the summer sell-off. Recently they hit new 52-week lows.

Valuations are cheap. In addition to a single digit P/E, the company has a price-to-book ratio of 0.7. A P/B ratio under 3.0 usually indicates value.

It also has a really low price-to-sales ratio of just 0.2. A P/S ratio under 1.0 can mean that the company is undervalued.

The Jones Group is navigating a very tricky retail market. But with shares as cheap as they are, this stock has value written all over it.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.

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