“Hanesbrands, Inc. (HBI, $40), a leading maker of apparel, has set the stage for growth. Over the past year, the company exited noncore businesses and reorganized operations to focus on high-margin products. Key apparel lines include Hanes, Champion and Playtex. The stock earns an Overall score of 94 — best among the 40 apparel makers in Quadrix, which earn an average score of 57. Hanesbrands boasts particularly strong scores in Momentum (91) and Value (83).
“An improved balance sheet and healthy cash flow should help sustain growth. On Dec. 31, long-term debt was $1.32 billion, down 27% from a year earlier and less than 60% of total capital, versus 73% at the end 2011. Last year cash flow from operations jumped more than threefold to $549 million. Aided by improved inventory management, free cash flow was a record $508 million. For 2013, the consensus calls for 28% profit growth to $3.35 per share. At less than 12 times estimated earnings, shares seem unduly cheap considering the growth outlook. Hanesbrands is being initiated as a Best Buy.”
- Richard J. Moroney, CFA, Upside, March 4, 2013