Michael Kors: Stock Soars as Investors Find Value

Michael Kors Stock Rose, Top Line Exceeded Expectations in 3Q16

(Continued from Prior Part)

Stock return

Michael Kors (KORS) stock rallied on February 2, 2016. Investors saw an improvement in the comp numbers and the value that the international business can add to the company. The company’s stock fell by 31.0% over the past year. Michael Kors has been struggling with declining comp numbers in the core business region of North America. Foreign exchange negatively impacted Michael Kors’s international market and slowing demand in the industry as a whole. Michael Kors’s peers like Ralph Lauren (RL), Coach (COH), and Kate Spade & Co. (KATE) saw their stock fall for nearly the same reasons. They underperformed the broad consumer discretionary sector as a whole.

Michael Kors seems cheap even after the rally

Michael Kors’s current PE (price-to-earnings) ratio is 11.8x. Compared to its peers, it looks quite cheap. Ralph Lauren and Kate Spade & Co. are trading at PE ratios of 16.2x and 20.1x, respectively. The industry (XLY) as a whole is trading at an average PE ratio of 22x. The forward PE multiple is 11.4x. This takes into consideration Wall Street analysts’ estimate of 4% growth in the company’s earnings in the next four quarters.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Michael Kors’s Earnings Surprised Wall Street Analysts

• Part 2 - Good Picture: Organic and Inorganic Growth in Retail Revenue

• Part 4 - Wall Street Analysts’ Consensus Is to ‘Hold’ Michael Kors Stock