Keep Following Growth Stock Opportunities

At the end of August 2006, I told you about a great company with excellent growth prospects. The company is called Zumiez Inc. (NASDAQ/ZUMZ). At that time, Zumiez was experiencing a significant correction. The stock was once a highflier, then it pulled back significantly on profit taking. The end of August was the perfect time to take on a position in the company.

Zumiez is a fast-growing specialty retailer of action and sports apparel, footwear, equipment, and accessories. The company sells to young men and women, targeting ages 12 to 24 with skateboarding, surfing, snowboarding, motocross, and BMX- related clothing. Based in Everett, Washington, the company has some 238 stores in various shopping malls.

According to the company, its revenues for the fourth quarter (14 weeks) ended February 3, 2007 grew to $112.4 million, representing impressive growth of 49% over revenues of $75.4 million generated in the comparable fourth quarter (13 weeks).

Net income for the latest period was a solid $11.3 million, or $0.39 per diluted share, representing growth of 66% over net income of $6.8 million, or $0.23 per diluted share. For all of fiscal 2006 (53 weeks) revenues grew 45% to $298.2 million, up from revenues of $205.6 million in fiscal 2005 (52 weeks).

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Net income for the year came to $20.9 million, or $0.73 per diluted share, representing excellent growth of 62% over net income of $12.9 million, or $0.47 per diluted share, generated in the prior year.

So, the company reported excellent numbers and it forecast fiscal 2007 earnings that were above previous Street estimates.

As it turned out, when I first wrote about this company, the stock hit its 52-week low of $20 per share, then it turned sharply higher. Luck was definitely on my side last year. Now, the stock just hit $40 per share, generating a 100% return in about seven months.

When you find a growth story like Zumiez, it always pays to keep following the stock, even if you don’t own any shares. The stock’s been volatile because it’s a fast-growing company facing high expectations from the Street. If you’d invested in this stock in July of last year, you’d only now be getting your money back. Of course, the story hasn’t changed — only the stock market’s perception of it has.

Zumiez was a great trade that I think will keep on paying its investors. $40 per share is a barrier for this stock and its valuation is now very high. Still, it’s likely that this stock will keep ticking higher. What a great company!