Maidenform Brands, Inc. speculation

Posted on February 9, 2006 , filed under Stocks | Print This Post

MFB, Maidenform Brands, Inc. announced that FY 2005 results would come in shy of analysts expectations. The company expects 2005 net sales to range between $381 million and $383 million. The company had previously projected net sales to range between $385 million and $390 million. Analysts on average were expecting $387 million in net sales. This is shy $9 million or 2.3%, if you take into account the high end of the company’s original projection and the low end of the current projection. The company also revised its 2006 net sales growth projection to a range of 5%-7% down from 7%-10%. MFB closed yesterday at $10.86 and traded as low as $8.49 in today’s morning trading. If you consider that the market fairly valued MFB, with the shares trading in the range of $10-$12 with the expectation that the company would match its original projections, you would consider it outrageous that the stock has lost as much as 21.8% in today’s trading. This is a clear example to me of the market overreacting and sending a stock price tumbling. The news of the company dropping its projected 2006 net sales growth by 2%-3% and the existing drop in 2005 net sales of 2.3%, should not be enough to cause MFB to shed 1/5 of the market cap of the company. I believe the current drop is fueled by strong speculation and short selling interest in the market. I believe this is what also creates valuable purchasing opportunities. I will keep a close watch on MFB and I will likely take a position in MFB if the market continues to push the price of the stock down below $8.

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