With a daily loss of -2.25%, a 3-month loss of -20.94%, and an Earnings Per Share (EPS) of 3.68, Tapestry Inc (TPR, Financial) presents an interesting case for value investors. Is the stock modestly undervalued? This analysis seeks to answer this question by examining the company's valuation, financial strength, profitability, and growth. We invite you to delve into the following analysis for a comprehensive understanding of Tapestry's intrinsic value.
About Tapestry Inc
Tapestry Inc (TPR, Financial) is a leading fashion and accessory conglomerate comprising renowned brands such as Coach, Kate Spade, and Stuart Weitzman. The company's products are sold via approximately 1,400 company-operated stores, wholesale channels, and e-commerce platforms across North America, Europe, Asia, and other regions. With a market cap of $7.70 billion and a current share price of $33.81, Tapestry's stock appears to be modestly undervalued when compared to its GF Value of $45.03.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is considered overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. In the case of Tapestry, the stock appears to be modestly undervalued, suggesting a higher long-term return than its business growth.
Assessing Tapestry's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it is crucial to review a company's financial strength before deciding to buy shares. Tapestry has a cash-to-debt ratio of 0.23, which ranks worse than 65.57% of companies in the Retail - Cyclical industry. Based on this, GuruFocus ranks Tapestry's financial strength as 6 out of 10, suggesting fair balance sheet strength.
Profitability and Growth of Tapestry
Investing in profitable companies is generally less risky, especially those with consistent profitability over the long term. Tapestry has been profitable 9 out of the past 10 years. With an operating margin of 17.6%, which ranks better than 90.67% of companies in the Retail - Cyclical industry, Tapestry's profitability is ranked 8 out of 10.
However, growth is an essential factor in the valuation of a company. Tapestry's 3-year average revenue growth rate is better than 76.99% of companies in the Retail - Cyclical industry. However, its 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of companies in the same industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) is another way to assess its profitability. For the past 12 months, Tapestry's ROIC has been 17.79, significantly higher than its WACC of 8.03.
Conclusion
In conclusion, the stock of Tapestry (TPR, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 0% of companies in the Retail - Cyclical industry. To learn more about Tapestry stock, you can check out its 30-Year Financials here.
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