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Here's Why Aaron's (AAN) is a Hot Investment Pick Right Now

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Aaron's, Inc. (AAN - Free Report) appears to be a solid bet, given its sturdy efforts to remain on growth trajectory. We expect the company to continue gaining from strength in the Progressive business, which is benefiting from robust invoice volume growth and solid customer base. Also, it remains on track with the transformation of the Aaron’s segment, which bodes well for growth.

Driven by these upsides, shares of this Atlanta, GA-based company have increased approximately 17% in the past six months against the industry’s decline of 3.1%.

This Zacks Rank #1 (Strong Buy) stock has also comfortably outperformed the Retail-Wholesale sector and the S&P 500 Index that advanced 1.9% and 2.4%, respectively, in the said time frame. Further, the stock is hovering close to its 52-week high of $64.49. With a long-term earnings growth rate of 15%, Aaron’s is positioned to attain new highs.

Let’s delve deeper into the major factors that have been driving the company’s performance.

Progressive Business Bodes Well

Aaron's Progressive segment, the company’s virtual lease-to-own business, has been significantly driving its results. This division contributed nearly 51.7% to total revenues in the first quarter of 2019. Robust growth in invoice volume and a solid customer base have been aiding the segment’s performance for the past few quarters. Notably, the segment’s revenues have doubled from $1 billion in 2015 to $2 billion in 2018, while consistently generating strong profits.

The company expects the momentum for the segment to continue in 2019, with estimated revenues of $2,100-$2,175 million and adjusted EBITDA of $260-$275 million.

Turnaround of Aaron’s Business Nears

Aaron’s business is on track with its transformational initiatives, comprising continued investments to improve customer experience, operating efficiencies, compliance and employee engagement. These efforts are likely to place the segment back on its growth trajectory, with sustainable long-term growth in revenues and earnings. Driven by the success of the pilots carried out in 2018, it plans to expand the next generation concept to 40 to 50 locations in 2019, including renovating existing stores and repositioning to new store locations. These new store concepts are poised to lift in-store traffic and revenue.

Additionally, the company’s e-commerce site ( has witnessed significant growth over the years, and is attracting new and younger customers. In 2019, the company expects revenues for the Aaron’s segment to be $1,775-$1,855 million, with adjusted EBITDA of $160-$170 million.

Wrapping Up

The bullish momentum across its business segments has boosted Aaron’s confidence for delivering a stellar performance in fiscal 2019. It projects total sales at $3,905-$4,065 million for the current fiscal, with adjusted EBITDA of $415-$442 million. Further, management expects adjusted earnings of $3.65-$3.85 per share.

We anticipate all aforementioned factors and its robust outlook to help the company remain in investors’ good books.

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