I think the selloff in FINL is overdone and there could be a buying opportunity here for a short-term trade.
The Finish Line distributes athletic and leisure footwear, active wear, and accessories. The Company offers sandals, boots, shoes, socks, shirts, shorts, pants, jackets, hats, gloves, bags, sunglasses, and shore care products. It are based in Indianapolis and markets its products worldwide.
The stock in trading down -$3 at around $19.90 this morning because its earnings were below estimates. I think this could be a buying opportunity. It is trading at levels that it found support at in early November, In other words, the last time that it traded down to these levels, the demand for the stock overpowered the supply and this caused prices to rise. That may be the case here.
In addition, at these levels it is below that valuations of its peers.
The current Price Earnings Ratio of FINL at these levels - 11.8x. This well below the Price Earnings Ratios of the other stocks in its peer group.
For example, Shoe Carnival has a 16.9x PE, Genesco's is 15.6x, Caleres is 15.3x, DSW's is 15.8x, and Foot Locker's is 14.4x. So FINL is undervalued on a fundamental basis now versus its peer group. This will attract value buyers into the market.
A possible strategy is to buy it at these levels with an initial stop-out at $19.25. This level is significant because it was the low trade in early November. If this level breaks it will probably go lower.
My target would be $22 because that was where the stock was trading yesterday and it gapped down from that level. That means there isn't too much 'vested interest' between current levels and $22. In other words, there is nobody who bought it at $21 this morning who is waiting to sell it if it gets back to $22 because they are underwater and want to get out at breakeven. It can be though of as being an 'air pocket' between current levels and $22. This means that if buyers enter the markets the prices could appreciate rapidly.
This is about a 3 to 1 Risk / Reward Ratio.