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This Investment Idea is Child’s Play

This Investment Idea is Child's Play
The market doesn’t recognize how much value there is in this apparel and toy retailer for young people.

While investing isn’t child’s play, that doesn’t mean you can’t profit from  clothing sellers aimed at the younger set.

Real Money Columnist Paul Price says he has found a great investment play in an unappreciated specialty retailer.

Children’s Place  (PLCE) – Get Children’s Place, Inc. Report is a retail company that focuses on clothes, toys and other durable goods for small children. The company has struggled somewhat in recent years, like most retailers, and took a particular hit during covid, again like most retailers.

It is also one of Paul Price’s favorite investments.

“In the short run, markets can do anything they please. There is often no rational way of accounting for the craziness you might see,” Price wrote recently on Real Money. “Over the long-term, though, almost every stock reverts back to its true value.”

It’s a question of perspective.  “Once you accept that present-day share price movements can be unrelated to reality, you begin to view discrepancies between value and price as positive events.”

For instance, “Grossly overpriced stocks give you the chance to sell at outlandish levels. Wildly underpriced shares offer the opposite, a chance to own them at what might be fractions of what they are already worth. Children’s Place is clearly now in the second category.”

This company’s stock has performed… somewhere between not well and terribly over the last several months. From a high over $111 per share in November, 2021, at time of writing Children’s Place traded for just over $53. This is a loss of more than 50% for investors who have held on to their shares over the period.

“Since the end of fiscal 2014, cash flow per share almost tripled and EPS rose by greater than 336%,” Price wrote. “Continuous shareholders saw no gains on the shares in nominal terms in those full eight years and only 8.15% including dividends.”

Yet at current levels, the stock trades at roughly 4 times trailing earnings. And that’s after a stellar quarterly earnings report.

If the market doesn’t recognize the value soon and bid up the stock, ‘PLCE might be a prime target for a buyout or a going private transaction which would speed up the process,” Price wrote.