URBAN OUTFITTERS INC (NASDAQ:URBN) – A Strong Candidate for GARP Investors

URBAN OUTFITTERS INC (NASDAQ:URBN) surfaced in our Peter Lynch-inspired stock screen, highlighting its potential as a growth-at-a-reasonable-price (GARP) candidate. The company demonstrates solid growth, strong profitability, and a healthy financial position while trading at an attractive valuation. Below, we break down why URBN fits the criteria for long-term investors.

Key Metrics That Stand Out

• Earnings Growth: URBN has delivered a 5-year average EPS growth of 15.5%, aligning with Peter Lynch’s preference for sustainable but not excessive growth.
• Reasonable Valuation: With a PEG ratio (5Y) of 0.88, the stock appears undervalued relative to its growth prospects. A PEG below 1 suggests the market may not be fully pricing in future earnings potential.
• Strong Profitability: The company’s return on equity (ROE) stands at 16.28%, well above the 15% threshold Lynch favored, indicating efficient use of shareholder capital.
• Healthy Balance Sheet: URBN carries no debt, a rare and positive trait that reduces financial risk. Its current ratio of 1.39 also signals sufficient liquidity to cover short-term obligations.

Fundamental Strengths

Our fundamental analysis assigns URBN a rating of 7 out of 10, with high marks for profitability and financial health. Key takeaways:

• Profit Margins: Operating margin (8.62%) and profit margin (7.25%) outperform most peers in the specialty retail sector.
• Cash Flow & Solvency: Positive cash flow and a strong Altman-Z score (4.08) suggest low bankruptcy risk.
• Valuation: Trading at a P/E of 13.13, URBN is cheaper than 77% of its industry peers and the broader S&P 500.

For a deeper dive, review the full fundamental report here.

Why It Fits a GARP Strategy

URBN’s combination of steady growth, sound financials, and reasonable valuation makes it a compelling pick for investors seeking quality at a fair price. While retail can be cyclical, the company’s diverse brands (Anthropologie, Free People, Nuuly) and strong execution provide stability.

Our Peter Lynch Strategy screener lists more stocks meeting these criteria and is updated regularly.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own research before making investment decisions.