The Container Store Has What Every Growth Stocks Needs The Container Store (NYSE: TCS) has what every growth stock needs and few have at this point in the market cycle: a very bright outlook. The company reported not only robust growth but growth above the consensus

The Container Store Is Accelerating Into Fiscal 2022

The Container Store (NYSE: TCS) has what every growth stock needs and few have at this point in the market cycle: a very bright outlook. The company reported not only robust growth but growth above the consensus and accelerating growth both sequentially and YOY. What the company also reports is an expectation for both revenue and earnings to accelerating again in F2022. And it is trading at a bargain price relative to the broad market, consumer stocks, and its home-improvement peers.

The Container Blows Past Consensus

The Container Store is uniquely positioned in the market as a home-improvement destination anyone can use. While many home improvement projects are limited to ownership closet remodels, storage solutions, and containers are ubiquitous. That's why it's no surprise the company is seeing sustained growth above and beyond what other pandemically supported retailers are reporting.

The Container Store reported $314.68 million in net consolidated revenue for the quarter which is up 30% from last year, set a company record, and beat the consensus by 750 basis points. The 30% growth is impressive enough on its own but made better by the fact growth accelerated from the +20.5% reported in the previous quarter. Now, there was the 53rd week in the quarter contributing about $17.7 million in sales but, even when adjusted for that, company revenue is up double digits, above consensus, and growth is accelerating from the previous quarter.

On a segment basis, growth was strongest in the core TCS business with sales up 31%. Within that general merchandise sales grew 41.6% while custom closets advanced a slower 22.2%. The international Elfa 3rd-party sales business grew by 18.0% but the real strength was in eCommerce which jumped by 72.2%.

Moving down to earrings, the company's margins widened significantly over the past year to drive high double and low triple-digit gains in GAAP and adjusted earnings. The company's increased by 180% to $0.69 to beat the consensus by $0.13. The results include about $0.07 impact from the extra week and still beat consensus when adjusted for that. The adjusted earnings of $0.71 grew nearly 67% from last year and beat by $0.14 with the same $0.07 impact from the extra week. Perhaps most important, the company's free cash flow came in positive for the year versus the year-prior loss and was used to help pay down debt.

The Container Store Is A Deep Value

The Container Store is a value any way you look at it. The 15X consensus that it trades for is low for a growth stock to begin with and this one is forecasting 50% growth in Q1. The 50% is against a very easy comp to be sure but, based on the company's momentum, we think a cautious estimate as well. It's more likely we'll see Q1 YOY growth in the range of 75% or better which puts the company on track for double-digit growth in fiscal 2022.

The Technical Outlook: The Container Store Is Poised To Move Higher

Shares of The Container Store are moving lower in early trading along with the broader market but appear to be overextending. The indicators have failed to confirm the new low and several new lows before this one and are highly divergent in relation to the market. Price action may continue lower in the near term, possibly aided by the high 15% short-interest, but we see a bottom forming fairly soon and the possibility of a strong short-covering rally and/or short-squeeze. In our view, this stock should be trading at least double the price it is now.

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