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Bull of the Day

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There have been retail winners and losers emerging from the 2012 holiday season. One of the winners was Francesca's Holdings Corporation (FRAN - Snapshot Report) which recently raised its fourth quarter guidance based on a strong holiday performance. It's a Zacks Rank #1 (Strong Buy).

Francesca's operates 360 small stores in 44 states in strip malls, shopping malls and neighborhoods which sell a mix of apparel, jewelry, accessories and gifts in a homey setting. It targets female shoppers aged 18 to 35 and brings in new merchandise every week to keep offerings fresh.

The company also has a website, francescas.com, which accounts for only 1.5% of sales but more resources are expected to be put into online sales this year.

Raised Fourth Quarter Guidance

Santa was good to Francesca's this holiday season. On Jan 14, the company raised its sales and EPS guidance for the fourth quarter due to the solid holiday.

Sales are expected to be between $84.5 million to $85 million, that's up from its Dec 5 guidance of $82.5 million to $83.5 million. Sales were up 37% to 38% over the prior year. Same store sales jumped 7% to 8%. Earnings per share are expected to be 29 to 30 cents, up from prior guidance of 27 to 28 cents.

All About the Growth

The growth is there. Francesca's has a strategy to expand to 900 stores in the next 7 years. Earnings are expected to rise 85% in fiscal 2012 and another 24% in fiscal 2013.

The analysts got bullish after the company talked up the solid holiday season in mid-January. 7 out of 13 estimates moved higher in the last month for fiscal 2012, which isn't surprising given that the company just raised guidance. But 5 out of 13 estimates also were raised for next year which means the analysts are optimistic that this earnings and sales growth will continue this year.

Very Volatile Stock

Francesca's stock isn't for the feint of heart. Since it started trading in 2011, it has been on a roller coaster. In May 2012, the stock suffered when the CFO left after posting inappropriate tweets and investors got nervous again in September 2012 when the CEO and one of the co-founders announced he was retiring from the company.

But shares have recently rebounded as the focus has returned to company fundamentals. Francesca's is expected to report fourth quarter results on March 12.

This Is No Value Stock

Francesca's is no value play. It has a forward P/E of 28, which is well above its peers at 17.4. It has a price-to-book ratio which is sky high at 22.5. Its peers average 2.7.

But it has a return on equity (ROE) of 114%, which crushes its peers at 17%. And because of its huge EPS growth this year, its PEG ratio almost puts it in undervalue territory, at 1.03, as a PEG under 1.0 can indicate value. Remember, though, you're buying the future growth.

For those investors looking for a retailer with expected double digit earnings growth, Francesca's should be on the short list.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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