Since adding The Buckle (BKE) to our portfolio on Nov. 10, its share price has appreciated more than 10% over our buy limit, even though its quarterly earnings report released one week later came in below expectations. The company reported third-quarter profits of 48 cents per share, three pennies shy of the average analyst estimate of 51 cents.

However, even after its surge last month BKE is still priced at a considerable discount to its peer group, trading at less than 11 times trailing earnings (sector average is closer to 25 times) and under three times book value (compared to almost 6 times for the sector). It also pays a dividend yield of 3.9%, which is more than twice what the average retailer pays.

What that means is either BKE is undervalued by at least 50%, or everyone else in its sector peer group is overvalued by 100%. In large part that is due to the 45% short interest in the stock (as a percentage of the float), but that could end up working in our favor if the stock price continues to rise and the shorts decide it’s time to close out their positions. Let the “short squeeze” begin!