Conn’s Inc (NASDAQ: CONN) is one of those companies that have generated significant returns for investors in the form of share price appreciation. CONN share price rose 301% in the last twelve months to $32 a share at present – with the 52-week trading range of $8.00 – $37.80. Albeit strong price rally, analysts are showing confidence on CONN share price.

Oppenheimer upgraded Conn’s stock to Outperform from Market Perform and increased the price target to $40 per share. Stephens has also raised CONN stock price target to $44 from $39 per share and provided the stock an “overweight” rating.

The company’s strategy of restructuring its business model started working considering its record net yield, a widening credit spread, and strong retail gross margins in the latest quarter.

It posted record net yield of 19.8% in the latest quarter, while its credit spread jumped sharply to 460 basis points – which is the record level in the past 11 quarters.

Mr. Miller looks confident in the management’s restructuring strategies.  He said, “Retail performance remains solid, and Conn’s achieved record third-quarter retail gross margins, which helped produce another quarter of strong retail operating income.”

Its credit revenue grew more than 18% to $81.3 million for the third quarter, compared to $68.4 million in the same period last year. Higher-yielding direct loan product supported the double-digit growth in credit revenue.

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Liquidity Position Supports Expansion Strategies

CONN looks stable regarding its liquidity position. It had $750.0 million under revolving credit facility along with $284.8 million under the revolving credit facility that the company can gain by enhancing its balance of eligible customer receivables. Its internal cash generation potential is also enough to cover capital requirements.  In the trailing twelve months, the company generated $104 million in operating cash flows compared to capital requirements of $16. Thus, it was left with $88 million in free cash flows to invest in growth opportunities.

CONN has opened two new Conn’s HomePlus® stores in North Carolina the latest quarter and one store in Virginia, extending the total store count to 166 in 14 states. Conn’s management plans to start five new stores in the next year.

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