Why Tailored Brands Stock Dropped 10.5%

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.

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.