This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

August 13, 2010 - Citi Trends, Inc. (CTRN-NASDAQ) operates as a retailer of urban fashion apparel and accessories. Its merchandise includes sportswear, dresses, outerwear, footwear, and intimate apparel and accessories, as well as an assortment of home decor items.

What caught my eye on this stock was the increasing sales and earnings in the last 3 years, the ones hardest hit by the current economic downturn. In 2007, sales were $437.5 million, then went to $488.2 million. Last year, they reached $551.9 million. Seven analysts following the company see a jump of 20.30% this year with a total of $663.67 million expected. Next year, they see another 15.50% increase, to $766.60 million.

Consenus estimate for earnings this year is $1.84, up from $1.36 last year and $1.22 in 2008. In 2007, they were $1.00. Next quarterly earnings will be released on August 18. Expect 7 cents a share compared to 0 cents last year in the second quarter (fiscal year ends in January). Next quarter, anlaysts see 6 cents vs 4 cents in last year's third period. The company delivered an earnings suprise (the good kind) last quarter, beating analysts' forecast of 67 cents by 28.40% with 86 cents. The quarter before the upside suprise was by 3 cents to 78 cents vs 75 cents predicted. The quarter before that, the surprise was 500%, showing a positive 4 cents vs an expected negative 1 cent.

The company is seeing accelerating sales and without much discounting to merchandise to watch it go out the door. Summer is always a hot month for apparel (sorry, had to use it). To further help, new stores recently added are beginning to contribute to the bottom line. As with all apparel stores, the main selling quarters are Spring and Winter with holiday shopping the key season. With an unseasonally hot summer in the southeast, the company should report good sales of dresses and accessories this quarter, especially since the heat arrived earlier than expected.

The company is looking to expand. There's a new distribution center in the works, most likely in Texas or Oklahoma. If an existing space isn't available, expect one to be built. Once occupied, look for more store openings in these areas as the company continues to grow.

More numbers: Trailing P/E is 16.9. Price to sales ratio is .70. Price to book is 2.13. For the last 12 months Operating margin was 6.10% with a Profit margin of 4.11%. Return on equity was 13.38% and Return on assets was 8.34%. There's $113.42 million in cash for $7.65 a share. There is no debt. Current ratio is 2.59. Book value per share is $13.17. Beta is 1.13. 52-week high was $37.57; low was $21.30. There are 14.84 million shares outstanding with a Float of 14.52 million. Insiders own 10.61% of the stock. Institutions own 91.30% of the Float. There is no dividend.

Parsing the numbers, it's obvious this is still a small stock. But one that is highly regarded. While the price swooned with the rest of the market last year, dipping to $9.40 share, the last 15 months have shown a quick recovery. The stock traded as high ast $57.80 in 2006, then went as low as $7.00 in 2008. It can be volatile. But if aggressive investors believe the worst of the economic crisis is behind us, then CTRN should be of interest. And even if the economy takes longer to improve than anyone would like, management has shown it knows how to keep its customers coming back and selling goods that don't need to be marked down.

- Company Website: www.cititrends.com

 Ted Allrich