ARO truly provides an interesting history in investing. ARO went public in 2002 and it had its usual IPO ride, going up only to fall down and take every believer down with the stock. Going from $8 to under $2 before the end of 2002 provided a wild ride for any new investor to what would become a billion dollar company just a few years later.
Aro finally found footing in 2002 after dropping over 75% from over $8 to under $2, after the great fall, it proceeded to rise to over $14 a share in under 3 years. This rise was a 700% return for those brave enough to jump into what seemed to be one of the riskiest investments available. Yet if you look at its history based on financial results you would have noticed that the price actually became very cheap and ARO was a great value at $2 and not such a great value at $8. So where are we now compared to the history of this companies stock price relative to its earnings?
In ARO's first year it had over 100 million shares outstanding. From 2007 to 2011 ARO has grown revenue from 1.4 billion to over 2.4 billion, It has reduced outstanding shares from 116 million to a little over 80 million shares, and grown earnings per share by an average of 29% per year from $0.88 to $2.49. Basically this company has performed great even though its stock has gone NOWHERE! ARO has just traded in a range, but in 2011we got an over correction and the stock dropped to under $10. This stock has become cheap again, maybe even back to the same value level it found itself in 2002 before it had a nice run of 700%.
Here is the deal, This stock price can not remain at this level if it continues to grow even remotely close to its historical growth! Saying it will go up 700% would be silly, but I believe that it will rise; Maybe not 700% but even if it is only 70% in the next couple years, that would be good wouldn't it? Trading for a small multiple of EBITDA this companies stock has a lot of potential and now has stores found in most malls all over the US. The margin of safety is high with its price relative to earnings and the potential is even higher with its history of growth.
I have been buying ARO with an average price of 10.18 a share and will own for sometime to come.
Aro finally found footing in 2002 after dropping over 75% from over $8 to under $2, after the great fall, it proceeded to rise to over $14 a share in under 3 years. This rise was a 700% return for those brave enough to jump into what seemed to be one of the riskiest investments available. Yet if you look at its history based on financial results you would have noticed that the price actually became very cheap and ARO was a great value at $2 and not such a great value at $8. So where are we now compared to the history of this companies stock price relative to its earnings?
In ARO's first year it had over 100 million shares outstanding. From 2007 to 2011 ARO has grown revenue from 1.4 billion to over 2.4 billion, It has reduced outstanding shares from 116 million to a little over 80 million shares, and grown earnings per share by an average of 29% per year from $0.88 to $2.49. Basically this company has performed great even though its stock has gone NOWHERE! ARO has just traded in a range, but in 2011we got an over correction and the stock dropped to under $10. This stock has become cheap again, maybe even back to the same value level it found itself in 2002 before it had a nice run of 700%.
Here is the deal, This stock price can not remain at this level if it continues to grow even remotely close to its historical growth! Saying it will go up 700% would be silly, but I believe that it will rise; Maybe not 700% but even if it is only 70% in the next couple years, that would be good wouldn't it? Trading for a small multiple of EBITDA this companies stock has a lot of potential and now has stores found in most malls all over the US. The margin of safety is high with its price relative to earnings and the potential is even higher with its history of growth.
I have been buying ARO with an average price of 10.18 a share and will own for sometime to come.
