Buy Vera Bradley (VRA)

The Business


Vera Bradley (VRA) is a top designer of handbags and other accessories for women.  Of course, what makes this company successful is that it has a name brand.  Similar to other successful fashion stores, like Louis Vuitton and Coach, Vera Bradley is able to leverage its name brand to successfully charge high premiums for its products.

Vera Bradley has created a very interesting niche in the fashion market.  In simple terms, Vera Bradley is able to consistently produce the new fad.  More specifically, Vera Bradley consumers anxiously await Vera's new product releases so that they can have the newest and coolest accessories.  Furthermore, Vera has somehow moved beyond merely being a product designer, and has created a club-like culture within its customer base.  Just imagine Regina George and her possy walking down the hallways in the movie "Mean Girls" with matching Vera Bradley handbags.

Unlike many other name brand designers, Vera's handbags and accessories are actually affordable.  This not only increases Vera's customer demographic, but it is another factor that influences customers to make repeat purchases.  Below are some pictures of the fashionable Vera Bradley products:



Financially Strong


Vera Bradley looks very impressive through a financial lens.  With profit margins and operating margins of over 13% and 22%, respectively, Vera clearly shows that it is making very good money off of its affordable product portfolio.  Furthermore, Vera has proven that it can grow its business very effectively by increasing sales by over 26%.  Not surprisingly, expectations are high as the market expects Vera to increase earnings by 23% per year over the next five years.

Valuation


Shares of Vera look expensive right now with a price to book ratio of 31 and PE ratio of 40, however the shares are expensive for a reason.  For investors who are in it for the long run, I recommend to buy shares of Vera Bradley.  Because of their strong branding and customer loyalty, I can see Vera being a multi-bagger for investors over the next 5-10 years.