99 Cents Only’s Stock Is No Bargain

by Peter Cohan | September 19, 2011 1:48 pm

99 Cents Only Stores (NYSE:NDN[1]) stock popped 9.4% on Friday. Is it still a bargain?

99 Cents claims that it sells merchandise at or below 99.99 cents per item. By April, it operated 285 retail stores — 211 in California, 35 in Texas, 27 in Arizona and 12 in Nevada. On Friday, news emerged that Apollo Management planned to bid $22 to $24 per share for 99 Cents.

Has news of this bid taken all the upside opportunity out of investing in 99 Cents? Here are two reasons to consider an investment:

Here are two reasons to avoid it:

If Apollo buys 99 Cents, the stock will rise another 5% to 10% from its current level. If not, it should plunge and stay in stock purgatory until it can accelerate its earnings growth.

Peter Cohan has no financial interest in the securities mentioned.

Endnotes:
  1. NDN: http://studio-5.financialcontent.com/investplace/quote?Symbol=NDN

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