Up 60% in Three Months, Can This Bargain Stock Keep Gaining?

Core Viewpoint - Signet Jewelers, the world's largest diamond jewelry retailer, is currently undervalued as investors focus on growth in the AI sector, despite the company's recent positive performance in sales and earnings [1][2]. Financial Performance - Signet reported a same-store sales increase of 2.5%, driven by an 8% growth in average unit retail prices, largely due to the popularity of lab-grown diamonds in its fashion segment [3]. - Overall revenue for the quarter rose 2% to $1.54 billion, surpassing the consensus estimate of $1.52 billion [3]. - Gross margin improved by 100 basis points to 38.8%, and adjusted operating income increased from $57.8 million to $70.3 million [4]. - Adjusted earnings per share rose from $1.11 to $1.18, exceeding the consensus estimate of $1.04 [4]. Strategic Initiatives - The "Grow Brand Love" strategy, introduced by the new CEO, focuses on enhancing product style and design, particularly in the top three banners: Kay, Zales, and Jared [6][7]. - Sales of lab-grown diamonds in the fashion segment surged by 60%, indicating a successful adaptation to customer preferences for more affordable options [8]. Future Outlook - Management reported a strong start to the second quarter, with revenue near the high end of guidance, which anticipates same-store sales between -1.5% and +1% [9]. - The full-year revenue guidance was raised to a range of $6.57 billion to $6.80 billion, with adjusted earnings per share expectations increased to $7.70 to $9.38 [10]. - The stock trades at a forward price-to-earnings ratio of 8.5, making it attractively priced following a 60% increase since March [11]. - The company is well-positioned for further gains due to its low valuation, improved product assortment, growth in lab-grown diamonds, and stock repurchase capabilities [12].