On September 18, 2023, Ralph Lauren (RL, Financial) saw a daily gain of 2.1%, despite a 3-month loss of 5.69%. With an Earnings Per Share (EPS) (EPS) of 7.82, the question arises: is the stock modestly undervalued? This article aims to provide a comprehensive analysis of Ralph Lauren's valuation, encouraging readers to delve into the subsequent sections for a detailed insight.
Company Overview
Founded by designer Ralph Lauren in 1967, Ralph Lauren Corp designs, markets, and distributes lifestyle products globally. With a diverse product range including apparel, footwear, eyewear, jewelry, home goods, and fragrances, the company operates under several brands like Ralph Lauren Collection, Polo Ralph Lauren, and Lauren Ralph Lauren. Distribution channels for Ralph Lauren include wholesale, retail, and licensing.
As of the given date, Ralph Lauren's stock price stands at $116.25, with a market cap of $7.60 billion. When juxtaposed with the GF Value of $128.66, the stock appears to be modestly undervalued, paving the way for an in-depth exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the stock's ideal fair trading value.
Considering these factors, Ralph Lauren (RL, Financial) stock appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Before investing in a company, assessing its financial strength is crucial to mitigate the risk of permanent loss. Ralph Lauren's cash-to-debt ratio of 0.59 ranks better than 53.59% of 989 companies in the Manufacturing - Apparel & Accessories industry. With an overall financial strength score of 7 out of 10, Ralph Lauren's financial health appears to be fair.
Profitability and Growth
Consistent profitability over the long term reduces investment risk. Ralph Lauren has been profitable 8 times over the past 10 years. With an operating margin of 12.06%, it ranks better than 82.45% of 1043 companies in the same industry. This indicates fair profitability.
Long-term stock performance is closely related to growth. Ralph Lauren's average annual revenue growth of 5.4% ranks better than 58.52% of 1015 companies in the Manufacturing - Apparel & Accessories industry. The 3-year average EBITDA growth is 20.2%, which ranks better than 68.87% of the companies in the same industry, indicating robust growth.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) provides a measure of its profitability. Ralph Lauren's ROIC of 15.09 exceeds its WACC of 9.36, indicating value creation for shareholders.
Conclusion
In conclusion, Ralph Lauren (RL, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 68.87% of 864 companies in the Manufacturing - Apparel & Accessories industry. To learn more about Ralph Lauren stock, you can check out its 30-Year Financials here.
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