Why Tailored Brands Stock Dropped 10.5%

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What happened

Shares of Men's Wearhouse owner Tailored Brands (NYSE: TLRD) stock fell again on Friday, down 10.5% as of 2:20 p.m. EDT -- and apparently on no worse news than the continuing retail rout detailed by The Wall Street Journal earlier this week.

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So what

So what are investors to make of Tailored Brands' disheveled state?

Here's how I look at it: Over the past 12 months, Tailored Brands has reported $83 million in GAAP earnings -- and $240 million in real free cash flow. That latter is quite an interesting number; Tailored Brands' entire market capitalization isn't much bigger at just $295 million.

Granted, Tailored Brands also carries a heaping helping of debt on its plate -- $1.1 billion, raising its enterprise value to $1.4 billion. But even so, this is a stock with less than a 5.8 multiple of enterprise value to free cash flow.

Now what

It wouldn't take a lot of growth to turn a stock this cheap into a bargain. And yes, analysts right now are predicting that Tailored Brands' earnings will shrink not grow this year -- falling some 16% to $1.64 before the year is out. But these same analysts expect growth to resume next year and predict that by 2021, Tailored Brands could be earning $2.13 per share -- about a 15% annualized growth rate over the next two years.

For a 6-times-FCF stock, that's more than enough growth to justify a buy here -- if you can stand the pain and have the patience to wait out the retail storm.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.