The stock of Kering SA (OTCPK:PPRUY, 30-year Financials) shows every sign of being significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $90.58 per share and the market cap of $113 billion, Kering SA stock appears to be significantly overvalued. GF Value for Kering SA is shown in the chart below.
Because Kering SA is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 6.9% over the past three years and is estimated to grow 6.70% annually over the next three to five years.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Kering SA has a cash-to-debt ratio of 0.37, which is in the middle range of the companies in the industry of Retail - Cyclical. The overall financial strength of Kering SA is 6 out of 10, which indicates that the financial strength of Kering SA is fair. This is the debt and cash of Kering SA over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Kering SA has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $15.5 billion and earnings of $2.073 a share. Its operating margin is 23.93%, which ranks better than 96% of the companies in the industry of Retail - Cyclical. Overall, the profitability of Kering SA is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Kering SA over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Kering SA is 6.9%, which ranks better than 73% of the companies in the industry of Retail - Cyclical. The 3-year average EBITDA growth rate is 17.2%, which ranks better than 69% of the companies in the industry of Retail - Cyclical.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Kering SA’s return on invested capital is 9.50, and its cost of capital is 4.74. The historical ROIC vs WACC comparison of Kering SA is shown below:
Overall, the stock of Kering SA (OTCPK:PPRUY, 30-year Financials) is believed to be significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 69% of the companies in the industry of Retail - Cyclical. To learn more about Kering SA stock, you can check out its 30-year Financials here.
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