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School Specialty, Inc. (SCHS)

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Recently, School Specialty (SCHS) has witnessed a rise in supplies orders. We believe that the company's improved pricing initiatives, product line-up, ecommerce systems and sales endeavors will help in regaining the lost market share from earlier.

Management also reaffirmed its revenue guidance of $735 million to $770 million and free cash flows in the range of $50 million to $60 million for fiscal 2011. The company leverages its strong distribution network to offer more than 75,000 items to approximately 91,000 schools in the U.S. This provides a competitive advantage to the company and bolsters its dominant position in the market.

We have a long-term Outperform recommendation on the stock. Our target price of $16.00 is a based on the P/CF multiple of 4.8X.

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