Movado Group Inc (NYSE:MOV), a US$737.52M small-cap, operates in the consumer discretionary industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a strong double-digit growth of 12.97% in the upcoming year , and a whopping growth of 32.76% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Movado Group is a laggard or leader relative to its consumer discretionary sector peers. See our latest analysis for Movado Group
What’s the catalyst for Movado Group’s sector growth?
E-commerce continues to be the fastest growing sales platform for consumer discretionary goods, changing the landscape for retailers. A large number of store closures and bankruptcies illustrates the shift in consumer preferences and increasing online competition. In the previous year, the industry saw growth of 9.78%, though still underperforming the wider US stock market. Movado Group lags the pack with its negative growth rate of -36.63% over the past year, which indicates the company will be growing at a slower pace than its luxury goods peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 71.08% in the upcoming year.
Is Movado Group and the sector relatively cheap?
Luxury goods companies are typically trading at a PE of 23.62x, relatively similar to the rest of the US stock market PE of 18.69x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 11.20% on equities compared to the market’s 10.53%. On the stock-level, Movado Group is trading at a higher PE ratio of 31.02x, making it more expensive than the average luxury goods stock. In terms of returns, Movado Group generated 4.91% in the past year, which is 6.29% below the luxury goods sector.
Movado Group’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Movado Group has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other luxury goods companies. However, before you make a decision on the stock, I suggest you look at Movado Group’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has MOV’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Movado Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.