On the trading floor, Ralph Lauren Corp (RL, Financial) recently faced a daily loss of 3.34%, yet it has achieved a 3-month gain of 9.95%. With an Earnings Per Share (EPS) of $7.83, investors are keen to understand if the stock reflects its true value. The central question we aim to answer is whether Ralph Lauren Corp (RL) is fairly valued at its current market price.
As we delve into the valuation analysis of Ralph Lauren (RL, Financial), we invite readers to explore the intricate details that contribute to the company's market valuation. Understanding the fair value of a stock is crucial for making informed investment decisions, and the following analysis seeks to shed light on this aspect.
Company Introduction
Ralph Lauren Corp, a symbol of premium lifestyle products, has a rich history dating back to 1967 when designer Ralph Lauren established the company in New York City. Today, it stands as a global brand with a diverse range of products including apparel, footwear, eyewear, jewelry, handbags, home goods, and fragrances. Its notable brands such as Ralph Lauren Collection, Polo Ralph Lauren, and Lauren Ralph Lauren reach consumers through wholesale, retail, and licensing channels across North America, Europe, and Asia.
With a current stock price of $129.17 and a Fair Value (GF Value) of $130.31, Ralph Lauren (RL, Financial) is positioned as fairly valued in the market. This comparison lays the foundation for a deeper analysis of the company's intrinsic value, seamlessly blending financial evaluation with key company insights.
Summarize GF Value
The GF Value is a proprietary metric that represents the intrinsic value of a stock. It is calculated by considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides an estimation of the fair trading value for Ralph Lauren (RL, Financial).
Ralph Lauren's stock appears to be fairly valued, as per GuruFocus' valuation method. The stock's fair value is assessed considering historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. When the share price significantly deviates from the GF Value Line, it suggests potential overvaluation or undervaluation, influencing future returns. Currently, at a price of $129.17 per share, Ralph Lauren seems to be trading at a value that closely matches its fair value.
Given that Ralph Lauren is fairly valued, the expected long-term return of its stock is likely to align with the rate of its business growth.
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Financial Strength
Investing in companies with robust financial strength is crucial to minimize the risk of permanent capital loss. A thorough examination of financial metrics such as the cash-to-debt ratio and interest coverage is essential. Ralph Lauren boasts a cash-to-debt ratio of 0.53, surpassing 54.18% of its peers in the Manufacturing - Apparel & Accessories industry. The company's financial strength is rated 7 out of 10 by GuruFocus, indicating a fair financial position.
Profitability and Growth
Long-term profitability is a less risky proposition for investors, and companies with consistent profitability are often more attractive. Ralph Lauren has maintained profitability for 8 out of the past 10 years. With a yearly revenue of $6.50 billion and an Earnings Per Share (EPS) of $7.83, the company's operating margin stands at 11.37%, ranking higher than 81.19% of its industry counterparts. Ralph Lauren's profitability score is a solid 7 out of 10.
Growth is a pivotal factor in a company's valuation, often correlating with long-term stock performance. Ralph Lauren's 3-year average revenue growth rate is commendable, outperforming 58.23% of the industry. Its 3-year average EBITDA growth rate of 20.2% is also noteworthy, ranking higher than 67.72% of its industry peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) is another method to assess profitability. Ralph Lauren's ROIC of 14.79 indicates efficient cash flow generation relative to the capital invested, while its WACC of 9.82 reflects the average rate of return expected by investors. The company creates value for its shareholders when ROIC exceeds WACC.
Conclusion
In conclusion, Ralph Lauren (RL, Financial) appears to be fairly valued, with a financial condition and profitability that are both rated as fair. The company's growth is impressive, better than two-thirds of its industry competitors. To gain a deeper understanding of Ralph Lauren's financials, investors can explore its 30-Year Financials here.
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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.
