• GB Davis

Security in Focus: Urban Outfitters ($URBN)

There are many aspects from a Fundamental perspective we find appealing about $URBN's valuation. First, it's trading at ~5x EV/EBITDA. Second, it has no debt and as of last Q, almost $630m in cash and cash equivalents. Third, although the fiscal year end earnings call was downbeat with some headwinds, and it has consistently revised earnings down, we believe that this remains the main reason for the large short interest (~13.6% of the float). Fourth, this has strong insider holdings (% of float) and institutional ownership (% of float). Fifth, this is priced at less than 1.0x trailing sales. Sixth, the company has been consistently buying back shares, generating good RoC for its existing shareholders. Seventh, the security has declined by nearly 20% over the last year. Earnings are June 4, 2019. Currently Street estimates calling for flat Revenue (same Q vs. prior year) and lower EPS (FY19, though higher than FY18). We'd look at $XRT as a hedge - and will also be looking for a discretionary retail pair trade too as a hedge. #NotInvestmentAdvice. #URBN #XRT $30.33

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