Always an upstart and maverick in the retail industry, Urban Outfitters ' performance this past holiday season also made it stand out.

Its same-store sales rose a year-on-year 3% for the two months ended Dec. 31. That was a sharp contrast to many of its peers, which posted steep declines—especially those catering to fickle and fiscally challenged teens.

Yet, the gain was less than the 5% anticipated by Wall Street, and disappointed investors sold off the shares.

They focused on the 6% decline in same-store sales posted by the Philadelphia-based company's flagship chain, Urban Outfitters, which accounts for about 45% of overall sales.

While the company cited a difficult retailing environment for the sales slide, it mainly blamed its own fashion misses, narrow product offerings, and lack of a clear popular fashion trend, which prompted heavier-than-usual discounting. Rompers, jumpsuits and sweatshirt dresses didn't catch on among the college-age hipster crowd that Urban Outfitters targets.

Still, in the rush to the exits, investors overlooked that same-store sales climbed 21% at Free People, Urban Outfitters' pricey bohemian-chic chain, which also boasts a wholesale business and accounts for roughly 14% of sales.

At Anthropologie, with its young-sophisticate offerings, same-store sales rose 11%. Anthropologie comprises 40% of total sales.

Adding to the impressiveness of the results, both chains have pricier merchandise and engage in less discounting. Newer and smaller concept stores such as Terrain, a gardening and housewares retailer, and BHLDN, a specialty wedding retailer that's an extension of Anthropologie, round out sales.

At about $35 a share, Urban Outfitters trades at 16.5 times projected earnings of $2.14 for fiscal 2015 ending January, an enticing discount to the 20 times forward earnings it typically fetches. It continues to merit a premium to most retailers because of its savvy management, its consistency in increasing sales and earnings, and its strong balance sheet and cash flow.

"I'm a fan, here," says Richard Jaffe, retail analyst at Stifel Nicolaus. "Urban remains a growth story…and there will be margin improvement."

Mr. Jaffe sees the stock rising to $48 a share, or just under 22 times his 2015 estimate of $2.24 a share, representing a possible gain of 37% as the company improves the merchandising at its core chain and as margins gain on fewer promotions.

Urban Outfitters' No. 1 priority, according to Chief Financial Officer Frank Conforti, is to "regain momentum at the Urban Outfitters' brand." Other companywide goals are to open new stores, boost online sales, launch a shoe line and expand its global presence.

"Please more customers" is a common Urban Outfitters' refrain. Expect investors to be pleased, and the stock to rise, if it meets its goals.

Sandra Ward is a senior editor for Barron's. For more stories, see