Unveiling Ralph Lauren (RL)'s Value: Is It Really Priced Right? A Comprehensive Guide
Ralph Lauren Corp (NYSE:RL) witnessed a daily gain of 2.45% and a 3-month loss of 9.11%. Despite these fluctuations, the company reported an impressive Earnings Per Share (EPS) of 7.82. With these figures in mind, the question arises: is Ralph Lauren (NYSE:RL) modestly undervalued? This article embarks on a comprehensive valuation analysis to answer this question. Let's dive deeper into the financials of Ralph Lauren to uncover its true worth.
Company Overview
Founded by designer Ralph Lauren in 1967, Ralph Lauren Corp is a renowned name in the lifestyle product industry. With a diverse product range including apparel, footwear, eyewear, jewelry, and fragrances, Ralph Lauren caters to a global market through its various brands and distribution channels. The company's current stock price stands at $114.57, while the GF Value, an estimation of its fair value, is $129. This discrepancy suggests that the stock might be modestly undervalued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value. It is calculated based on historical trading multiples, GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GuruFocus Value calculation, Ralph Lauren (NYSE:RL) is estimated to be modestly undervalued. At its current price of $114.57 per share and a market cap of $7.50 billion, Ralph Lauren's stock is estimated to be modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength poses a higher risk of permanent loss of capital. Therefore, it is crucial to review the financial strength of a company before investing. A great starting point is to look at the company's cash-to-debt ratio and interest coverage. Ralph Lauren has a cash-to-debt ratio of 0.59, which is better than 53.97% of 982 companies in the Manufacturing - Apparel & Accessories industry. GuruFocus ranks Ralph Lauren's overall financial strength at 7 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Ralph Lauren has been profitable 8 out of the past 10 years. Over the past twelve months, the company had a revenue of $6.40 billion and an Earnings Per Share (EPS) of $7.82. Its operating margin is 12.06%, ranking better than 82.47% of 1044 companies in the Manufacturing - Apparel & Accessories industry. GuruFocus ranks Ralph Lauren's profitability at 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. Ralph Lauren's 3-year average revenue growth rate is better than 58.83% of 1008 companies in the Manufacturing - Apparel & Accessories industry. Ralph Lauren's 3-year average EBITDA growth rate is 20.2%, which ranks better than 68.14% of 857 companies in the Manufacturing - Apparel & Accessories industry.
ROIC vs WACC
Another method to determine a company's profitability is to compare its Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC). If the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Ralph Lauren's return on invested capital is 15.09, and its cost of capital is 9.62.
Conclusion
In conclusion, the stock of Ralph Lauren is estimated to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 68.14% of 857 companies in the Manufacturing - Apparel & Accessories industry. To learn more about Ralph Lauren stock, you can check out 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.
This article first appeared on GuruFocus.
