Momentum Play: 99c Only Stores (NDN)

99c Only Stores (NDN) continues to perform well in the weak consumer environment, recently hitting a new multi-year high above $18 after reporting a 26% Q1 earnings surprise in early August.

Company Description

99c Only Stores operates a chain of retail stores that sells general and consumable consumer good for 99 cents. The company was founded in 1965 and has a market cap of $1.18 billion.

With unemployment remaining in elevated territory, consumers are still very focused on cutting corners and pinching pennies. That dynamic has worked in the favor of the extreme retailers, lifting NDN to better than expected Q1 results from August 4.

First-Quarter Results

Revenue for the period was up 4.6% from last year to $337 million, with same-store sales up 2.7%. Earnings also came in strong at 24 cents per share, 26% ahead of the Zacks Consensus Estimate. The company now has an average earnings surprise of 52% over the last four quarters.

NDN scored in a couple of key categories, with gross margin expanding 30 basis points to 40.5% of revenue while consolidated operating expenses decreased 260 basis points to 30.9%.

Balance Sheet Looks Great

NDN also emerged from the good quarter with its pristine balance sheet in tact, with its cash and equivalents up $8 million from last year to $44 million against no debt.

Estimates

Estimates took a nice little jump forward on the good quarter after the company raised guidance, with the current year adding 5 cents to $1.06 and the next year also up 5 cents to $1.19, a solid 12% growth projection.

Valuation

The valuation picture is in tact too, where NDN has a forward P/E of 16X against its peers 14.5X.

2-Year Chart

NDN has been trending higher for most of the last two years, recently spiking higher on the good quarter to hit a new multi-year high above $18. Look for support from the long-term trend line and recent low on any weakness, take a look below.

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