Tapestry Inc (TPR, Financial) has recently shown a daily gain of 3.19%, although it has experienced a slight decline of 2.54% over the past three months. With an Earnings Per Share (EPS) of 3.78, investors might wonder if the stock is fairly valued. This analysis delves into Tapestry's valuation, encouraging readers to explore the intricacies of its financial standing and market valuation.
Company Introduction
Tapestry Inc (TPR, Financial), known for its distinguished brands such as Coach, Kate Spade, and Stuart Weitzman, operates a robust global platform with a significant presence in North America, Europe, and Asia. The company's strategic focus on women's handbags and accessories, which constituted 69% of its sales in fiscal 2023, underscores its market specialization. The recent acquisition of Capri, adding Michael Kors, Versace, and Jimmy Choo to its portfolio, further expands Tapestry's market influence. With a current stock price of $41.35 and a GF Value of $44.32, Tapestry presents a compelling case for valuation analysis.
Understanding GF Value
The GF Value is a unique measure designed to estimate the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. This metric suggests that Tapestry's stock is fairly valued, predicting that the long-term return should closely mirror the company's business growth trajectory. With a market cap of $9.50 billion, Tapestry's financial and market performance aligns closely with its GF Value, indicating a balanced investment outlook.
Financial Strength and Stability
Investing in a company with solid financial strength is crucial to mitigate the risk of loss. Tapestry's cash-to-debt ratio stands at 0.8, which is commendable within the Retail - Cyclical industry. This ratio, combined with an interest coverage check, provides a clear perspective on the company's financial health. Tapestry's overall financial strength is rated 5 out of 10, indicating a stable financial foundation but also room for improvement.
Profitability and Growth Prospects
Tapestry has demonstrated strong profitability, with an operating margin of 17.59% that ranks well above industry peers. This profitability, coupled with a consistent track record over the past decade, highlights the company's efficient operational framework and market adaptability. However, its growth metrics indicate some challenges, with a 3-year average EBITDA growth of 0%, suggesting a potential area for strategic focus and improvement.
ROIC vs. WACC: A Critical Comparison
Assessing the return on invested capital (ROIC) against the weighted average cost of capital (WACC) offers insights into Tapestry's value creation efficiency. Tapestry's ROIC of 17.8 significantly surpasses its WACC of 8.75, indicating robust profitability and value generation capabilities relative to its capital costs.
Conclusion
Overall, Tapestry (TPR, Financial) appears to be fairly valued with strong financial health indicators and profitability. While growth remains an area for potential enhancement, the company's strategic acquisitions and market positioning suggest a stable investment profile. For a deeper dive into Tapestry's financials and to explore other high-quality investment opportunities, consider visiting Tapestry's 30-Year Financials and GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
